Suppose That an Economy Were Based in Part on a Phillips

question 8

Multiple Choice

Suppose that an economy were based in part on a Phillips curve relationship that did not include an expectations term. Suppose that the unemployment rate in 1993 were to fall 1 point below the natural rate before returning to the natural rate for the rest of the decade. If the coefficient relating the percentage GDP gap and inflation were 0.4, then you would predict

• A) a perpetual increase in the rate of inflation equal to 1.2 points.
• B) a one-shot increase in the rate of inflation for the year 1993 equal to 1.2 points.
• C) a perpetual increase in the rate of inflation equal to 0.4 point.
• D) a one-shot increase in the rate of inflation for the year 1993 equal to 0.4 point.
• E) none of the above.

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Controlled Outcome Research

Research studies that implement controls, such as comparison groups, to determine the effectiveness of an intervention.

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Therapeutic practices that combine elements from different therapeutic traditions to create a more comprehensive approach to treatment.

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