-An Economy?s Natural Unemployment Rate Is 4 Percent

question 341

Multiple Choice

$$\begin{array} { | l | l | } \hline \begin{array} { l } \text { Inflation rate } \\\text { (percent per year) }\end{array} & \begin{array} { l } \text { Unemployment rate } \\\text { (percent) }\end{array} \\\hline 8 & 3 \\\hline 6 & 4 \\\hline 4 & 5 \\\hline 2 & 6 \\\hline\end{array}$$
-An economy?s natural unemployment rate is 4 percent. The table above gives some points on the economy?s short-run Phillips curve. If the expected inflation rate becomes 8 percent per year, then the ___________

• A) short-run Phillips curve shifts upward
• B) short-run Phillips curve shifts downward
• C) long-run Phillips curve shifts leftward
• D) long-run Phillips curve shifts rightward

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Definitions:

Base Year

A reference year used in economics for comparative purposes, allowing the calculation of index numbers or real values.

Consumer Price Index

An index measuring the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

Base Year

A specific year against which economic or financial data is compared to measure economic performance over time.

Structural Unemployment

A type of unemployment resulting from a discrepancy between the skills available in the workforce and those required by employers.