Figure 28-7 -Refer to Figure 28-7. Consider the Phillips Curves Depicted in Curves

question 226

Multiple Choice

Figure 28-7
-Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If the assumptions of the rational expectations school hold true, and the Fed's announcement is credible, the rate of unemployment will be ________ in the short run.

• A) less than 5.5 percent
• B) 5.5 percent
• C) between 5.5 and 7.5 percent
• D) 7.5 percent

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De Facto

A term used to describe practices that exist in reality, even though they are not officially recognized by laws.

Promissory Notes

Written, legally binding agreements in which one party promises to pay another a specified sum of money at a future date or on demand.

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Legal documents that grant the holder the right to buy or sell a particular asset at a specific price before a certain date.