Some Economists Argue That the Short-Run Phillips Curve Is Not

question 232

Multiple Choice

Some economists argue that the short-run Phillips curve is not vertical,and that monetary policy can be effective in the short run.Which one of the following is not one of the reasons for this skepticism?

• A)Empirical evidence shows workers and firms have rational expectations.
• B)Contracts with workers and suppliers may hinder firms' abilities to adjust to price changes.
• C)Wages and prices may not adjust rapidly enough to keep the short-run Phillips curve vertical.
• D)Individuals may not be able to use information of Fed Policy to make a reliable forecast of inflation.

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Definitions:

Investing Activities

Financial transactions related to the acquisition or disposal of long-term assets and investments, considered part of the cash flow statement.

Equipment Purchase

The acquisition of machinery or office equipment, usually classified as a capital expense, to be used in the operations of a business.

Land Purchase

An acquisition of real estate property involving a one-time payment or installment payments, considered a long-term asset on the balance sheet.

Net Cash Flow

The difference between a company's cash inflows and outflows within a given period, indicating the company's ability to generate cash.