Economists Milton Friedman and E.S. Phelps suggested that the apparent trade-off suggested by the Phillips curve could not be exploited by policy makers, because
A. unemployment levels and the inflation rate have a negative (inverse) relationship.
B. economic participants are not rational, and therefore act unpredictably to any policy change.
C. economic participants routinely incorporate changes in the inflation rate into their expectations.
D. unemployment levels and the inflation rate have a clear, positive relationship.
Answer: C
You might also like to view...
One of the methods of reducing the geographical disadvantage faced by poorer countries is:
A) by moving to a socialist economic system. B) by undertaking large-scale disease eradication programs. C) by borrowing financial resources at market interest rates. D) by reducing participation in international trade.
Which of the following types of bond typically has the highest yields? (The letters are Moody's ratings.)
a. a federal government bond b. a corporate bond rated Aaa c. a corporate bond rated Aa d. a corporate bond rated A e. a corporate bond rated Baa
The wage a person requires before accepting a job is referred to as the ________ wage.
A. compensating B. reservation C. psychological D. minimum
Suppose the only characteristic of beer that a consumer cares about is alcohol content. Currently, Bud Light and Miller Lite both have the same alcohol content. a. Illustrate the consumer's indifference curves in a graph with ounces of Miller Lite on the horizontal and ounces of Bud Light on the vertical axis. b. Suppose that the producers of Bud Light lower the price of Bud Light. How will your answer to (a) change?
c. Suppose that the producers of Bud Light lower the alcohol content of their beer by 50%. How will your answer to (a) change? d. Since we identify tastes with indifference maps, would you say that the consumer's tastes have changed in (b) or (c)? e. How could we change the units we use to measure Miller Lite in order to get the indifference map in (c) to again look like the one in (a)? What will be an ideal response?