The Figure Given Below Represents the New Classical Long Run

question 103

Multiple Choice

The figure given below represents the new classical long run and short run Phillips curve measuring inflation rate on vertical axis and unemployment rate on horizontal axis.
Figure 15.2

-Refer to Figure 15.2. Assume that the government adopted an unexpected expansionary monetary policy that has the economy currently at point D. If people expect that this inflation rate will persist next year, the economy will now:

• A) move to point A.
• B) move to point B.
• C) move to point C.
• D) move to point E.
• E) remain at point D.

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Definitions:

Price-elastic

Descriptive of a product or service for which demand significantly increases or decreases as the price changes.

Health Care

The organized provision of medical services to individuals or communities to maintain or improve their health.

Household Budget

A budgeting strategy that distributes anticipated personal earnings into categories for spending, saving, and paying off debts.

Price Elasticity

An assessment of the sensitivity of the demand for an item to shifts in its cost.