The Short-Run Tradeoff Between the Unemployment Rate and the Inflation

question 54

Multiple Choice

The short-run tradeoff between the unemployment rate and the inflation rate shown by the Phillips curve is represented in the AS-AD model by

• A) the vertical potential GDP line.
• B) the upward-sloping aggregate supply curve.
• C) rightward shifts of the aggregate supply curve.
• D) leftward shifts of the aggregate supply curve.
• E) the downward-sloping aggregate demand curve.

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Definitions:

Market

A venue or medium where buyers and sellers come together to exchange goods, services, or financial instruments.

Coupon Rate

The percentage annually paid as interest on a bond, relative to its face value.

Market Interest Rate

The prevailing rate of interest determined by supply and demand in the money market.

Par

Typically refers to a face value of a bond or stock that is set at issuance, or the stated value of a currency.