Once Economists Take into Consideration Changes in the Expected Inflation

question 57

Multiple Choice

Once economists take into consideration changes in the expected inflation rate and supply shocks,the Phillips curve

• A) only remains useful when explaining the long-run trade-off between unemployment and inflation.
• B) remains a useful tool for explaining the short-run trade-off between unemployment and inflation.
• C) is no longer a useful tool for explaining any trade-off between unemployment and inflation.
• D) accurately explains the short-run and long-run trade-offs between unemployment and inflation.

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Definitions:

Asset Beta

A measure of the risk of an asset held in isolation, compared to the market as a whole.

Equity Beta

A metric that measures the volatility of a stock or portfolio in relation to the overall market; a measure of systemic risk.

Capital Structure

The mix of debt and equity that a company uses to finance its operations and growth.

Unlevered Cost

The cost of an investment that does not include the impact of borrowing; essentially the expense borne without considering the effect of leverage.