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The Phillips Curve Describing an Economy Takes the Form U

question 18

Multiple Choice

The Phillips curve describing an economy takes the form u = uⁿ - α(π - Eπ) . The central bank directly sets the inflation rate to minimize the following loss function, L (u, π) = u + γπ². The symbol u denotes the unemployment rates, uⁿ is the natural rate of unemployment, π is the inflation rate, Eπ is the expected inflation rate, and α and γ are behavioural response parameters of the economy. Private agents form their expectations rationally before the central bank sets the inflation rate. In an economy in which the central bank dislikes inflation much more than unemployment:

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Definitions:

Parol Evidence

A rule that prevents parties to a written contract from presenting extrinsic evidence of terms of the agreement that contradict, modify, or vary the contractual terms written in the document.

Assignor

In a contract, the party who transfers his or her rights to the contract to a third party (an assignee), giving the assignee the right to collect what was contractually agreed on in the original contract.

Assignee

In a contract, the party who receives the rights of another party (an assignor) to collect what was contractually agreed on in the original contract.

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An agreement two parties enter into before marriage that clearly states the ownership rights each party enjoys in the other party’s property. To be enforceable, the agreement must be in writing.