Exhibit 17-5 Short-Run and Long-Run Phillips Curve

question 36

Multiple Choice

Exhibit 17-5 Short-run and long-run Phillips curve

Suppose the government shown in Exhibit 17-5 uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have adaptive expectations, then:

• A) the economy will remain stuck at point E₁.
• B) the natural rate will permanently increase to 8 percent.
• C) unemployment will rise to 8 percent in the short run.
• D) unemployment will remain at 6 percent as the inflation rate falls.

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Definitions:

Trait Approach

A method in psychology focused on identifying and measuring the characteristic patterns of thought, feeling, and behavior that make up an individual's personality.

Individual Differences

Variations among people in their behavior, personality, cognitive abilities, or physical traits.

Correlational Methods

Research strategies used to observe and statistically analyze the relationship between two or more variables, without necessarily determining cause and effect.

Effect Size

A quantitative measure of the strength of a phenomenon or the magnitude of a difference between groups in a scientific study, indicating the practical significance of research results.