Friedman and Phelps Suggested That There Should Not Be a Stable

question 54

Multiple Choice

Friedman and Phelps suggested that there should not be a stable relationship between inflation and unemployment,but there should be a stable relationship between

• A)anticipated inflation and frictional unemployment.
• B)anticipated inflation and cyclical unemployment.
• C)unanticipated inflation and frictional unemployment.
• D)unanticipated inflation and cyclical unemployment.

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Definitions:

Elasticity of Demand

A measure indicating how much the quantity demanded of a good changes in response to a change in the price of that good.

Excise Tax

A type of tax imposed on specific goods, services, or activities, often used to discourage consumption of certain products or to raise government revenue.

Efficiency Loss

The decrease in economic efficiency that occurs when market conditions prevent the optimal allocation of resources, often caused by market failures or interventions.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.