Given the Augmented Phillips Model: Y = β₀ + β₁x₁+β₂x₂

question 41

Multiple Choice

Given the augmented Phillips model: y = β₀ + β₁x₁+β₂x₂ +ε,where y = actual rate of inflation (%) ,x₁ = unemployment rate (%) ,and x₂ = anticipated inflation rate (%) .The response variable or variables(s) in this model is (are) the ___________________.

• A) unemployment rate
• B) actual inflation rate
• C) anticipated inflation rate
• D) unemployment rate and anticipated inflation rate

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Definitions:

Contestable Market

A market with free entry and exit, where a company's prices and outputs are constrained by the threat of competition from potential entrants.

Economic Profit

The offset between total financial inflow and all encompassing outgoings, covering both specified and unspecified expenses.

Entry And Exit

Refers to the capability of businesses to freely enter into or exit from markets based on regulatory, economic, and market conditions, impacting competition and market dynamics.

Competitive Price-searcher

A market condition where businesses set their prices based on the competition, constantly seeking to offer the best value to attract customers.