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:

Fundamental Drive

An inherent impulse that motivates behavior or action, fundamental to survival or psychological fulfillment.

Personal Growth

The ongoing process of understanding and developing oneself to achieve one's fullest potential.

Human Behaviour

The range of actions and mannerisms exhibited by humans in conjunction with their environment, social structures, and culture.

Structuralism

An early school of psychology that used introspection to explore the elemental structure of the human mind.