The Importance of the Vertical Long-Run Phillips Curve Hypothesis Is

question 49

Multiple Choice

The importance of the vertical long-run Phillips curve hypothesis is its implication that

• A) any increase in the rate of inflation caused by monetary and fiscal policies designed to reduce unemployment is temporary.
• B) price controls can do no good.
• C) monetary and fiscal policies designed to reduce unemployment below its natural rate do so temporarily.
• D) to solve the inflation-unemployment problem, labor unions must recognize that their wage gains are eroded by inflation.
• E) expansionary monetary or fiscal policy shifts the long-run Phillips curve to the left.

---

Definitions:

Refunding

The process of replacing an existing debt with a new debt, often to take advantage of more favorable borrowing terms.

Marginal Tax Rate

The percentage of tax applied to your income for each tax bracket in which you qualify.

Leveraged Buyouts

The acquisition of another company using a significant amount of borrowed money (bonds or loans) to meet the cost of acquisition.

Public Shareholders

Individuals or entities that own shares of stock in publicly traded companies.