Along the Short- Run Phillips Curve, If the Actual Unemployment

question 10

Multiple Choice

Along the short- run Phillips curve, if the actual unemployment rate falls below the natural unemployment rate, the

• A)expected inflation rate will fall to zero.
• B)actual inflation rate may be greater than, equal to, or less than the expected inflation rate
• C)actual inflation rate will be greater than the expected inflation rate.
• D)actual inflation rate will be less than the expected inflation rate.
• E)actual inflation rate will be equal to the expected inflation rate.

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Definitions:

Required Return

The minimum rate of return needed on an investment, determined by the investor’s risk tolerance and the investment’s risk.

NPV

Net Present Value; a calculation used to determine the present value of an investment by discounting its future cash flows.

Initial Investment

The amount of money used to start a new project, purchase an asset, or invest in the market at the initiation phase.

Payback Period

The amount of time it takes to recover the cost of an investment, calculating how long it will take to break even from the initial expenditures.