Suppose the Phillips Curve Is Represented by Nt - Nt-

question 61

Multiple Choice

Suppose the Phillips curve is represented by nt - nt- 1 = 20 - 2ut. Given this information, which of the following is most likely to occur if the actual unemployment in any period is equal to 6%?

• A) The rate of inflation will tend to increase.
• B) The price level will tend to increase.
• C) The price level will tend to decrease.
• D) The rate of inflation will be constant.
• E) The rate of inflation will tend to decrease.

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Definitions:

Consumer Equilibrium

A state in which a consumer has allocated their income in a way that maximizes their utility, given their budget constraints.

Utility

In economics, a measure of satisfaction or happiness that people derive from consuming goods and services.

Divisible

Capable of being divided or separated into smaller parts without losing its inherent qualities or value.

Utils

A hypothetical unit of measurement used in economics to quantify the level of utility or satisfaction derived from consuming goods or services.