Some Economists Argue That the Short-Run Phillips Curve Is Not

question 108

Multiple Choice

Some economists argue that the short-run Phillips curve is not vertical, and that monetary policy can be effective in the short run.Which one of the following is not one of the reasons for this skepticism?

• A)Empirical evidence shows workers and firms have rational expectations.
• B)Contracts with workers and suppliers may hinder firms' abilities to adjust to price changes.
• C)Wages and prices may not adjust rapidly enough to keep the short-run Phillips curve vertical.
• D)Individuals may not be able to use information of Bank of Canada policy to make a reliable forecast of inflation.
• E)Many workers and firms do not make forecasts of inflation at all.

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