In Terms of the Phillips Curve, the Experience of the 1970s

question 145

Multiple Choice

In terms of the Phillips curve, the experience of the 1970s indicates that macro-policy

• A) can permanently reduce unemployment if we are willing to tolerate higher inflation.
• B) can reduce unemployment in the long run if we are willing to tolerate higher inflation.
• C) may be able to reduce unemployment but cannot retard inflation.
• D) may be able to reduce unemployment in the short run, but there is little evidence that expansionary policies can reduce unemployment permanently.

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Definitions:

Exponential Smoothing Model

A forecasting technique that applies decreasing weights to past observations as they recede into the past.

Level Significance

The probability of rejecting the null hypothesis in a statistical test when it is actually true, typically denoted as alpha (α).

RMSE

Root Mean Square Error, a measure of the magnitude of differences between values predicted by a model or an estimator and the values observed.