Suppose the Expected Inflation Rate Is 8 Percent and the Unemployment

question 267

Multiple Choice

Suppose the expected inflation rate is 8 percent and the unemployment rate is 3 percent. If the inflation rate rises to 10 percent and the expected inflation rate does not change,

• A) the short- run Phillips curve will shift downward.
• B) there will be a movement along the short- run Phillips curve.
• C) the natural unemployment rate will rise.
• D) the short- run Phillips curve will shift upward.

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Definitions:

Materials Price Variance

The difference between the actual cost of materials used in production and the expected (or standard) cost, reflecting changes in material prices.

Raw Materials Purchases

The total cost incurred from buying raw materials that are to be used in the production process.

Standard Costs

The predetermined costs of manufacturing a single unit or a number of product units during a specific period under current or anticipated operating conditions.

Gallons

A volume measurement primarily utilized in the United States for quantifying liquid substances.