The Short- Run Phillips Curve Intersects the Long- Run Phillips

question 141

Multiple Choice

The short- run Phillips curve intersects the long- run Phillips curve at the

• A)natural interest rate.
• B)nominal interest rate.
• C)expected inflation rate.
• D)natural inflation rate.

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Definitions:

Dual Approach

In economics, a methodology or analysis technique that involves examining problems from both sides or using two complementary perspectives or sets of tools.

Indifference Curve

A curve representing all combinations of goods and services among which a consumer is indifferent, showing the same level of satisfaction or utility.

Budget Line

A graphical representation of all possible combinations of two goods or services that can be purchased with a given income and prices, identical to the concept of a budget constraint but rephrased.

Duality

Alternative way of looking at the consumer’s utility maximization decision: Rather than choosing the highest indifference curve, given a budget constraint, the consumer chooses the lowest budget line that touches a given indifference curve.