Assume That the Phillips Curve Equation Is Represented by Nt

question 48

Multiple Choice

Assume that the Phillips curve equation is represented by nt - nt- 1 = (m + z) - aut. An increase in the unemployment rate will cause:

• A) an increase in the markup over labour costs.
• B) an increase in the inflation rate over time.
• C) a decrease in the markup over labour costs.
• D) a decrease in the inflation rate over time.
• E) an increase in expected inflation.

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Definitions:

Serial Bonds

Bonds that mature at different intervals over a period of time, allowing the issuer to retire a portion of the bond issue at regular intervals.

Present Value

The immediate value of a future stream of income or lump sums of money, assessed with a specific interest rate in mind.

Nominal Rate

The interest rate stated on a financial instrument, without adjustment for the full effect of compounding or inflation.

Annuity

A financial product that pays out a fixed stream of payments to an individual, often used as part of retirement strategies.