The Long-Run Phillips Curve Shows the Relationship Between the Inflation

question 2

Multiple Choice

The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the economy is

• A)away from potential GDP.
• B)at full inflation.
• C)at full employment.
• D)in expansion.
• E)in recession.

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Definitions:

Numeraire Good

A commodity selected as a standard of value and used as the unit of account in economic models, facilitating comparisons between different goods or services.

Initial Endowment

The initial allocation of assets, income, or resources that an individual, institution, or country possesses.

Min

The smallest or least possible amount, quantity, value, or degree.

Pareto Optimal Allocation

A distribution of resources in which it is impossible to make any individual better off without making at least one individual worse off.