If People Believe That the Central Bank Is Going to Reduce

question 23

Multiple Choice

If people believe that the central bank is going to reduce inflation,then

• A)the short-run Phillips curve shifts right and the sacrifice ratio will rise.
• B)the short-run Phillips curve shifts right and the sacrifice ratio will fall.
• C)the short-run Phillips curve shifts left and the sacrifice ratio will rise.
• D)the short-run Phillips curve shifts left and the sacrifice ratio will fall.

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Definitions:

Average Fixed Cost

Fixed cost divided by output.

Variable Costs

Expenses that change in proportion to the activity of a business.

Fixed Costs

Expenses that do not change with the level of output or sales in the short term.

Marginal Cost Curve

Graphical representation showing how the cost to produce one more unit changes as production increases, typically U-shaped due to economies and diseconomies of scale.