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:

Historic Cost

The original monetary value of an asset or transaction at the time it occurred, without adjustments for inflation or other factors.

Partner Withdraws

Amounts taken out of a partnership by a partner for personal use, reducing the partner's capital account in the business.

Capital Account

An account on a nation's balance of payments that records all transactions involving the purchase or sale of assets, or in business, the account showing the net worth of a business entity.

Bonus

An extra payment given to employees as an incentive or reward beyond their regular compensation.