Use the Following to Answer Questions

question 145

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% future inflation. If the central bank decreases the money supply such that aggregate demand shifts to the left and unemployment rises to 8%, then inflation will:

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

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Definitions:

Temporary Investments

Investments not intended to be held for a long term and may include stocks or bonds, classified for easy liquidation.

Debts to Total Assets Ratio

A financial metric indicating the proportion of a company's assets that are financed through debt, assessing financial leverage.

Debt to Stockholders' Equity

A financial ratio that measures the proportion of a company's debt to the equity held by its shareholders.

Debt to Total Retained Earnings Ratio

A financial measure used to evaluate the proportion of a company's debt compared to its retained earnings.