Consider an Economy That Is Operating at the Intersection of the Short-Run

question 12

Multiple Choice

Consider an economy that is operating at the intersection of the short-run and long run Phillips curves. The level of unemployment is 2.5 per cent while the level of inflation is 4 per cent. At this point, if speculation about oil price hikes increase inflationary expectations in this economy, which of the following must happen?

• A) The level of unemployment will be higher than 2.5 per cent at the new equilibrium.
• B) The short-run Phillips curve will move up and the new level of inflation will be higher than 4
• C) The economy will move up along the short-run Phillips curve, increasing the level of inflation above 4 per cent.
• D) The short-run Phillips curve will move down from its original position.

---

Definitions:

Personal Style

An individual's distinctive manner of dressing or presenting themselves, often reflecting their personality or preferences.

Short Report

A concise document focused on presenting information or findings related to a specific issue, often used in a business or academic context.

Informal Situation

A scenario or context characterized by a relaxed, casual, or unstructured setting, often involving personal interactions.

Elaborate Introductory Material

Detailed and extensive background information provided at the beginning of a document, presentation, or speech.