Suppose the Phillips Curve Is Represented by the Following Equation

question 1

Multiple Choice

Suppose the Phillips curve is represented by the following equation: πt - πt₋₁ = 20 - 2ut.Given this information,which of the following is most likely to occur if the actual unemployment in any period is equal to 6%?

• A)the rate of inflation will tend to increase
• B)the rate of inflation will be constant
• C)the rate of inflation will tend to decrease
• D)none of the above

---

Definitions:

External Costs

Costs of a transaction or activity that affect parties who are not directly involved in it, such as pollution affecting the wider community.

Law of Demand

The principle that, all else being equal, an increase in the price of a good will decrease the quantity demanded, and a decrease in price will increase the quantity demanded.

Income Taxes

Taxes levied by governments on individual or corporate income.

Car Rental

A service that allows customers to borrow a vehicle for a certain period of time in exchange for a fee.