Suppose the Economy Had Been Operating Along a Given Short-Run

question 112

Multiple Choice

Suppose the economy had been operating along a given short-run Phillips curve for several years and then experienced a year of stagflation.The year of stagflation would:

• A)be represented as a move upward along the short-run Phillips curve.
• B)be represented as a move downward along the short-run Phillips curve.
• C)be represented as a point above the short-run Phillips curve.
• D)be represented as a point below the short-run Phillips curve.
• E)correspond to the origin.

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Definitions:

Marginal Utility

The incremental enjoyment or value obtained from consuming an extra unit of a good or service.

Income-Consumption Curve

A graph that shows how a consumer's optimal bundle of goods changes as their income changes, all else being constant.

Marginal Utility

The change in satisfaction or utility gained from consuming an additional unit of a good or service.

Utility Maximizing

The process by which individuals select the mix of goods and services that maximizes their satisfaction or utility, given their budget constraint.