Assume That Expected Inflation Is Based on U E =

question 20

Multiple Choice

Assume that expected inflation is based on u e = 8nt- 1. If 8 = 0, we know that:

• A) low rates of unemployment will cause steadily increasing rates of inflation.
• B) high rates of unemployment will cause steadily decreasing rates of inflation.
• C) the Phillips curve illustrates the relationship between the level of the inflation rate and the level of the unemployment rate.
• D) a decrease in the unemployment rate will have no effect on inflation.
• E) an increase in the unemployment rate will have no effect on inflation.

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American Dollars

The recognized monetary unit of the United States, commonly utilized as a standard and reserve money across the globe.

Outsourcing

The practice of hiring third parties to perform services or create goods that were traditionally done in-house, to reduce costs and improve efficiency.

Exchange Rate Risk

Exchange rate risk is the potential for investors to experience losses due to changes in the exchange rate between two currencies.

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