Along a Short-Run Phillips Curve, the

question 13

Multiple Choice

Along a short-run Phillips curve, the

• A) short-run cost of higher inflation is a higher real interest rate.
• B) long-run cost of lower inflation is higher unemployment.
• C) short-run cost of lower inflation is higher interest rates.
• D) short-run cost of lower unemployment is higher inflation.
• E) short-run benefit of lower unemployment is lower inflation.

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Definitions:

Imperfectly Elastic

Describes a demand curve that does react to price changes, but not in a perfect one-to-one relationship, indicating some sensitivity to price changes but not to an infinite degree.

Substitute

A good or service that can be used in place of another to satisfy similar needs or desires.

Economic Rent

The excess payment made to a factor of production over what is necessary to keep it in its current use, reflecting payment beyond its opportunity cost.

Equilibrium Wage

The wage rate at which the quantity of labor supplied equals the quantity of labor demanded in the market.