According to Friedman and Phelps's Analysis of the Phillips Curve

question 116

Multiple Choice

According to Friedman and Phelps's analysis of the Phillips curve,

• A)the unemployment rate will be below its natural rate whenever inflation is negative.
• B)the unemployment rate will be below its natural rate whenever inflation is positive.
• C)the unemployment rate will be below its natural rate only if inflation is less than expected.
• D)the unemployment rate will be below its natural rate only if inflation is greater than expected.

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Definitions:

Overconfidence Effect

A cognitive bias where an individual's subjective confidence in their judgments is reliably higher than their objective accuracy, often leading to misjudgments and errors in decision-making.

Cognitive Biases

Systematic patterns of deviation from norm or rationality in judgment, causing illogical conclusions or decision making.

Heuristics

Simple, efficient rules or methods used to form judgments and make decisions, based on limited and often personal data, rather than exhaustive analysis.