The Inflation and Unemployment Data for the 1970s Suggest That

question 119

Multiple Choice

The inflation and unemployment data for the 1970s suggest that the aggregate-supply shocks of that period caused the

• A) relationship between the unemployment rate and the rate of inflation to remain stable and predictable and to exhibit a clear trade-off.
• B) relationship between the unemployment rate and the rate of inflation to be similar to that found during the 1960s.
• C) Phillips Curve to shift to the right.
• D) Phillips Curve to shift to the left.

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Definitions:

Risk-Free Rate

The expected return on an investment that carries no risk, commonly exemplified by the interest rate on government bonds.

Call Option

An option contract that grants the holder the right to buy an underlying asset at a predetermined price before the option expires, without the obligation to do so.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis without regard to its market value.

Strike Price

The fixed price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.