According to the Phillips Curve, Other Things Being Equal, Inflation

question 16

Multiple Choice

According to the Phillips curve, other things being equal, inflation depends positively on all of the following except:

• A)expected inflation.
• B)the unemployment rate.
• C)the natural unemployment rate.
• D)a supply shock, if one occurs.

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Definitions:

Investment

The action or process of allocating resources, usually money, with the expectation of generating an income or profit.

Real Discount Rate

The rate used to discount future cash flows to their present value, adjusting for inflation.

Nominal Discount Rate

The rate of interest quoted or advertised on a loan or investment, not adjusted for inflation.

Inflation

The speed at which overall prices for goods and services increase, leading to a decline in purchasing power.