Let the Price Adjustment Coefficient in an Expectations-Augmented Phillips Curve

question 51

Multiple Choice

Let the price adjustment coefficient in an expectations-augmented Phillips curve equal 0.2. If potential GDP in the United States were approximately

• A) nothing but the transient effects of a short recession.
• B) something in the neighborhood of $1 trillion in foregone GDP.
• C) an increase in the unemployment rate of roughly 3.33 points.
• D) slower growth as a result of investment expenditure foregone during the recession.
• E) all answers but a.

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Definitions:

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Actions, reactions, or mannerisms displayed by individuals or groups in response to stimuli or in various situations.

Forethought

The act of thinking or planning about the future beforehand.

Anticipate

To expect or predict something before it happens.

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