What Action Should the Fed Take If It Wants to Move

question 248

Essay

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

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Definitions:

Proximal Stimulus

Reception of information and its registration by a sense organ (e.g., retinal images in the case of vision). Contrast with distal stimulus.

Percept

The outcome of a perceptual process; the meaningful interpretation of incoming information.

Distal Stimulus

An object, event, or pattern as it exists in the world. Contrast with proximal stimulus.

Prägnanz

A principle from Gestalt psychology that suggests people will perceive and interpret ambiguous or complex images as the simplest form(s) possible.