If the Economy Is at the Point Where the Short-Run

question 125

Multiple Choice

If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?

• A)Unemployment equals the natural rate, and expected inflation equals actual inflation.
• B)Unemployment is above the natural rate, and expected inflation equals actual inflation.
• C)Unemployment equals the natural rate, and expected inflation is greater than actual inflation.
• D)Unemployment is below the natural rate, and inflation is lower than the expected rate.

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Definitions:

Specialization

A production strategy where individuals, regions, or nations focus on the production of a limited scope of goods or services to gain greater efficiency and productivity.

Economies of Scale

Economies of Scale describe the cost advantages that a business can achieve due to expansion, leading to a lower cost per unit of output.

Long-run Average Total Costs

The per-unit production cost when all factors of production are variable and optimized for scale.

Long-run Average Total Cost

The per-unit cost of production when all inputs, including those typically fixed, can be varied, showing economies of scale if downward sloping.