Figure 17-4 -Refer to Figure 17-4.Consider the Shift in the Short-Run Phillips

question 4

Multiple Choice

Figure 17-4
-Refer to Figure 17-4.Consider the shift in the short-run Phillips curves shown in the above graph.This shift may be explained by

• A)an increase in the natural rate of unemployment from 5.0 to 6.2 percent.
• B)an increase in the expected rate of inflation from 4.0 to 5.5 percent.
• C)either an increase in the natural rate of unemployment from 5.0 to 6.2 percent or an increase in the expected rate of inflation from 4.0 to 5.5 percent.
• D)None of the above is correct.

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Definitions:

Inflation Rate

The velocity at which there is a general increase in the cost of goods and services, thereby reducing the effective purchasing capability.

Compound Interest CSB

The calculation of interest on a Canada Savings Bond (CSB) where interest earned also earns interest over time.

Redemption Value

The value at which a bond or other debt instrument can be redeemed before its maturity by the issuer.

Compound-Interest GIC

A Guaranteed Investment Certificate (GIC) where interest is compounded periodically and added to the principal balance, leading to interest earnings on interest.