The Theory Behind the Short-Run Phillips Curve Relationship Is That

question 7

Multiple Choice

The theory behind the short-run Phillips curve relationship is that:

• A) people's expectations of future inflation are based on their most recent experience.
• B) people form expectations on the basis of all available information.
• C) monetary policy has no real effects in the long-run.
• D) monetary expansion stimulates the economy, and this outcome reduces the unemployment rate.
• E) prices are flexible in the long run, causing no relationship between unemployment and inflation.

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