Scenario 35-2 ​

question 220

Multiple Choice

Scenario 35-2
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In Flosserland, the Department of Finance is responsible for monetary policy. Flosserland has had an inflation rate of 25% for many years.
-Refer to Scenario 35-2. Suppose that the Flosserland Department of Finance undertakes a public relations campaign to convince people that it will soon change monetary policy to reduce inflation to 12.5%. If Flosserlanders believe their government then which, if any, curve(s) shift left?

• A)The short-run and the long-run Phillips curve
• B)The short-run but not the long-run Phillips curve
• C)The long-run but not the short-run Phillips curve
• D)Neither the short-run nor the long-run Phillips curve

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