The Next Questions Refer to the Following

question 33

Multiple Choice

The next questions refer to the following.
Suppose that, in the absence of supply shocks, the inflation-unemployment relationship is inflation rate = expected inflation rate + 2(natural rate of unemployment - actual unemployment rate) .
-In the absence of stabilization policy,which of the following would most likely occur?

• A) the natural rate of unemployment will rise to .07
• B) the expected rate of inflation will fall to .02
• C) in the long run, the inflation rate will be .04 and the unemployment rate will be .06
• D) the Phillips Curve will shift outward over time
• E) the inflation rate will rise to .07

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Definitions:

Economic Income

The total value of all earnings received over a period of time, including wages, rental income, interest, and profits.

Consumption

The usage of goods and services by households, including the actions of selecting, purchasing, using, and disposing of products.

Double Taxation

The levy of tax by two or more jurisdictions on the same declared income (in the case of income taxes), asset (in the case of capital taxes), or financial transaction (in the case of sales taxes).

Tax Base

The assessed value of all taxable income, property, assets, or other items that a government can tax.