The Phillips Curve

question 41

Multiple Choice

The Phillips curve:

• A)was relatively well-defined during the 1960s.
• B)demonstrates how to achieve stable economic growth.
• C)shows the trade-off between deficits and inflation.
• D)helps to stimulate entrepreneurial profits.
• E)becomes vertical at full employment.

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Definitions:

Income Effect

A change in the quantity demanded of a product that results from the change in real income (purchasing power) caused by a change in the product’s price.

Wage Rate

The amount of compensation offered to an employee per unit of time (e.g., hourly, daily) or piece of work done.

Purely Competitive

Purely competitive markets are characterized by many buyers and sellers, homogeneous products, and the absence of barriers to entry or exit, leading to firms being price takers.

Imperfectly Competitive

Refers to market structures that do not meet the conditions of perfect competition, often characterized by a small number of sellers, product differentiation, or barriers to entry.