The Tradeoff Between Inflation and Unemployment Does Not Exist in the Long

question 100

Multiple Choice

The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so expected inflation:

• A) exceeds the inflation rate.
• B) equals the inflation rate.
• C) is below the inflation rate.
• D) equals the inflation rate of the previous year.

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Definitions:

Close Substitutes

Products or services that can easily replace each other in the eyes of the consumer, resulting in a high degree of interchangeability and competition.

Single Firm

A business or company that operates alone in its industry without competitors.

Purely Monopolistic

Characterizes a market scenario where one entity exclusively controls the entire market for a product or service, eliminating all direct competition.

Downsloping Demand Curve

A graph representing the relationship between the price of a good and the quantity demanded, indicating that as price decreases, demand increases.