Use the Following to Answer Questions

question 188

Multiple Choice

Use the following to answer questions :
Figure: Expected Inflation and the Short-Run Phillips Curve
SRPC₀ is the Phillips curve with an expected inflation rate of zero; SRPC₂ is the Phillips curve with an expected inflation rate of 2%.
-(Figure: Expected Inflation and the Short-Run Phillips Curve) Look at the figure Expected Inflation and the Short-Run Phillips Curve. Suppose that this economy has an unemployment rate of 6%, inflation of 2%, and an expectation of 2% inflation. If the central bank increases the money supply such that aggregate demand shifts to the right and unemployment falls to 4%, then inflation will:

• A)fall to -2%.
• B)not change.
• C)rise to 2%.
• D)rise to 4%.

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Definitions:

Carbon Tetrachloride

A colorless liquid with the formula CCl4, historically used as a cleaning agent, fire extinguisher, and refrigerant, now recognized as a carcinogen.

Pyridine

A basic heterocyclic organic compound with the formula C5H5N, featuring a ring structure similar to benzene but with one methine group (\(CH\)) replaced by a nitrogen atom.

Aromatic

Compounds that contain a planar ring of atoms that are stabilized by a delocalization of pi electrons according to Huckel's rule.

Antiaromatic

Antiaromatic compounds are cyclic, planar molecules that possess 4n π electrons (where n is an integer) and are destabilized due to their electronic structure, contradicting the stability seen in aromatic compounds.