What did Friedman and Phelps predict would happen if policymakers tried to move the economy upward along the Phillips curve? Did the behavior of the economy in the late 1960s and the 1970s prove them wrong?
Friedman and Phelps predicted that, why government intervention may not be a good solution t over time, people would come to expect higher inflation, so the short-run Phillips curve would shift right. When this happened, unemployment would go back to its natural rate, but inflation would be higher. The behavior of the economy in the late 1960s and the 1970's was consistent with their theory. Inflation rose but unemployment did not remain low.
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Which of the following does not exist when an economy is operating at full employment?
a. An unemployment rate of 5 percent or 6 percent b. Seasonal unemployment c. Structural unemployment d. Cyclical unemployment e. Frictional unemployment
To be binding, a price ceiling must be set above the equilibrium price
a. True b. False Indicate whether the statement is true or false
In the real world, ____ factors that affect demand and supply can change at once.
a. many b. isolated c. no d. psychological
If intended investment increases by $50, and the MPC remains unchanged at 0.75, then
a. the economy is in equilibrium at both levels of intended investment because MPC remains unchanged b. national income remains unchanged regardless of the change in intended investment c. MPS must increase from 0.25 to 0.75 d. national income increases by $200 e. we know this couldn't happen because the MPC cannot remain unchanged when intended investment changes