In the Long Run, the Phillips Curve Will Be Vertical

question 256

Multiple Choice

In the long run, the Phillips curve will be vertical at the natural rate of unemployment if

• A) the long-run aggregate demand curve is vertical at potential output.
• B) the long-run aggregate demand curve is horizontal at the natural rate of inflation.
• C) the long-run aggregate supply curve is vertical at potential output.
• D) the long-run supply curve is horizontal at the natural rate of inflation.

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Definitions:

Multifactor Model

An investment model that seeks to describe the expected returns on a security based on various risk factors, providing a more comprehensive view than models based on a single factor.

Market Indexes

Benchmarks that track the performance of a specific basket of stocks, representing a particular sector or the market as a whole.

Chen, Roll, and Ross

Refers to a model developed by the economists Stephen A. Ross, Randolph W. Roll, and Edwin H. Chen that enhances the capital asset pricing model by including factors related to macroeconomic risk.

Multifactor Models

Financial models that use multiple variables to explain or predict asset prices and returns, incorporating factors like size, value, and momentum.