Ultimately, What Causes the Short-Run Reduction in Unemployment Associated with an Increase

question 78

Multiple Choice

Ultimately, what causes the short-run reduction in unemployment associated with an increase in inflation?

• A) the shape of the long-run aggregate-supply curve
• B) unanticipated inflation, not inflation per se
• C) rational expectations
• D) anticipated changes in the price level

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Definitions:

Nominal Interest Rate

The percentage increase in money that borrowers pay to lenders, not adjusted for inflation.

Real Interest Rate

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to savers and investors.

Inflation Rate

The rate expressed in percentage terms showing the increase in prices for goods and services, leading to a reduction in buying power.

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to assess price changes associated with the cost of living.