Some Economists Argue That the Short-Run Phillips Curve Is Not

question 232

Multiple Choice

Some economists argue that the short-run Phillips curve is not vertical,and that monetary policy can be effective in the short run.Which one of the following is not one of the reasons for this skepticism?

• A)Empirical evidence shows workers and firms have rational expectations.
• B)Contracts with workers and suppliers may hinder firms' abilities to adjust to price changes.
• C)Wages and prices may not adjust rapidly enough to keep the short-run Phillips curve vertical.
• D)Individuals may not be able to use information of Fed Policy to make a reliable forecast of inflation.

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Definitions:

Labour Efficiency Variance

The difference between the actual hours worked and the standard hours expected to produce a certain number of units, multiplied by the standard hourly wage rate.

Actual Direct Labour Rate

This measures the actual cost per hour of labor directly involved in the manufacturing process.

Materials Price Variance

The difference between the actual cost of direct materials purchased and the standard cost, multiplied by the quantity purchased.

Standard Quantity

The predetermined amount of materials or resources expected to be used in a production process or manufacturing of a product.