Use the Following to Answer Question 118

question 185

Multiple Choice

Use the following to answer question 118:
-(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%. Refer to 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:

Outliers

Observations in data that do not follow the pattern of the majority, significantly differing from other observations.

Covariances

Covariances are measures that indicate the extent to which two random variables change in tandem. A positive covariance indicates that two variables tend to move in the same direction.

Regression Analysis

A numerical approach for analyzing the correlation between a dependent variable and one or more independent variables.

Descriptive Statistics

Statistics that summarize or describe the characteristics of a data set, including measures like mean, median, mode, and standard deviation.