The Traditional Phillips Curve Showing a Tradeoff Between Inflation and Unemployment

question 114

Multiple Choice

The traditional Phillips Curve showing a tradeoff between inflation and unemployment is based on having a stable:

• A) Aggregate demand and a shifting short-run aggregate supply
• B) Short-run aggregate supply and a shifting aggregate demand
• C) Long-run aggregate supply and a shifting aggregate demand
• D) Aggregate demand and a shifting long-run aggregate supply

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Definitions:

Market Risk Premium

The extra profit an investor is aiming for by choosing to invest in a market portfolio that carries risk instead of opting for assets devoid of any risk.

Government Bond

A type of investment where an investor loans money to a government in exchange for periodic interest payments plus the return of the bond's face value at maturity.

Treasury Bill

A Treasury Bill (T-Bill) is a short-term U.S. government debt obligation backed by the Treasury Department with a maturity of one year or less.