In the Short Run, an Increase in Inflation Initiated by the Reserve

question 6

Multiple Choice

In the short run, an increase in inflation initiated by the Reserve Bank and not matched by an increase in the expected inflation rate results in ________ in the long-run Phillips curve and ________ in the short-run Phillips curve.

• A) a rightward shift; a downward shift
• B) a rightward shift; an upward shift
• C) no change; a downward shift
• D) no change; no change
• E) a leftward shift; an upward shift

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Definitions:

Unrealized Gain-Equity

The increase in the value of investments that a company holds in other companies' stocks, which have not been sold and thus the gain has not been realized.

Debt Securities

Financial instruments representing a loan made by an investor to a borrower, typically corporate or governmental, which include terms related to the amount, interest rate, and maturity date.

Maturity Value

The amount payable to the holder of a financial instrument at its maturity date, often the principal plus any final interest payment.

Owner Relationship

The legal and operational connections and responsibilities between the owner(s) and their business entity.