The Expectations-Augmented Phillips Curve Identifies Several Ways to Reduce Inflation

question 71

Multiple Choice

The expectations-augmented Phillips curve identifies several ways to reduce inflation. They include

• A) running the economy near its potential.
• B) working to lower expected inflation by policy and encouragement.
• C) reducing the sensitivity of prices to gaps between actual and potential GDP by rigidly controlling prices and wages.
• D) eliminating a government spending surplus whenever actual GDP falls short of potential GDP.
• E) none of the above.

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Definitions:

Accommodation

In cognitive psychology, the process by which individuals adjust their schemas to incorporate new information.

Equilibrium

A state of balance or stability within a system, where all forces acting on the system are canceled out by each other.

Sex-limited

Traits or characteristics that are expressed in only one sex, even though the genes for these traits might exist in both sexes.

Sex-linked

Referring to traits genetically determined by genes located on sex chromosomes.