An Increase in the Expected Inflation Rate Will

question 31

Multiple Choice

An increase in the expected inflation rate will:

• A)shift the short-run Phillips curve upward and to the right.
• B)shift the short-run Phillips curve downward and to the left.
• C)not shift the short-run Phillips curve unless the unemployment rate changes.
• D)cause the unemployment rate associated with each inflation rate to decrease.
• E)tend to increase production unless the actual inflation rate also increases.

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Definitions:

Marginal Utility

The incremental utility or happiness a consumer derives from acquiring and using an additional unit of a good or service.

Utility Per Dollar

A measure of the satisfaction or usefulness obtained from purchasing goods or services relative to the amount of money spent.

Diminishing Marginal Utility

The principle stating that as more of a good or service is consumed, the marginal benefit of additional units will decline.

Utility Maximization

The process by which consumers adjust their consumption to achieve the highest level of satisfaction from their available resources.