Samuelson and Solow Believed That the Phillips Curve

question 16

Multiple Choice

Samuelson and Solow believed that the Phillips curve

• A)implied that low unemployment was associated with low inflation.
• B)indicated that the aggregate supply and aggregate demand model was incorrect.
• C)offered policymakers a menu of possible economic outcomes from which to choose.
• D)All of the above are correct.

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Definitions:

Fed

Short for the Federal Reserve, which is the central banking system of the United States, responsible for monetary policy.

Externalities

Costs or benefits that affect parties who did not choose to incur that cost or benefit, often leading to market failure if unaddressed.

Moral Hazard

A situation in which one party engages in risky behavior or lacks incentive to guard against risk because another party bears the consequences.

Moral Hazard

The situation in which one party can take risks because they know that they will not have to bear the full consequences of their actions.