According to the Equation for the Phillips Curve, If Nominal

question 50

Multiple Choice

According to the equation for the Phillips curve, if nominal wages and labor productivity both increase by 3%, then the inflation rate _____ and unemployment _____.

• A) increases by 3%; falls
• B) increases by 3%; rises
• C) is zero; is at its natural rate
• D) increases by 3%; is at its natural rate

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Definitions:

Depreciation

The reduction in the value of an asset over time, typically due to wear and tear, obsolescence, or market conditions.

Net Investment

The total spending on new capital minus depreciation on existing capital within a given period.

Gross Investment

Refers to the total amount of investment in physical assets and capital expenditures made by businesses before accounting for depreciation.

Depreciation

The accounting method of allocating the cost of a tangible asset over its useful life, reflecting wear and tear, obsolescence, or age.