What is the Phillips Curve? What concept does it illustrate?
What will be an ideal response?
The Phillips Curve shows the relationship between the unemployment rate and the rate of inflation. The relationship is an inverse one, so there is a short-run trade off between the unemployment rate and the rate of inflation. For example, if the unemployment rate increases by 1% then the inflation rate might decline by .5%. The concept was developed by A.W. Phillips in Great Britain based on empirical observation of the relationship between unemployment and inflation in that nation. Modern economists reject the idea of a stable, predictable Phillips Curve, although many economists do agree that there is a short-run trade off between unemployment and inflation.
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If the firm in the figure above attempted to minimize its average total cost by producing 100 pairs of Tommy jeans per day at an average total cost of $20 per pair and it sold those jeans for $80 per pair, the firm would ________
A) earn zero economic profit B) earn a larger economic profit that a firm that produced 125 jeans because the ATC of producing 125 jeans is higher than the ATC of producing 100 jeans C) incur an economic loss D) earn a smaller economic profit than a firm that produced 125 jeans E) achieve an efficient use of resources
Price indexes like the CPI are calculated using a base year. The term base year refers to:
a. the first year that price data are available. b. any year in which inflation was higher than 5 percent. c. the most recent year in which the business cycle hit the trough. d. an arbitrarily chosen reference year.
If the dollar price of the English pound increases from $1.50 to $1.75, the dollar has
a. appreciated relative to the pound, and English goods have become less expensive to U.S. consumers. b. depreciated relative to the pound, and English goods have become less expensive to U.S. consumers. c. appreciated relative to the pound, and English goods have become more expensive to U.S. consumers. d. depreciated relative to the pound, and English goods have become more expensive to U.S. consumers.
The demand for reserves curve in the federal funds market is
A) horizontal. B) vertical. C) upward sloping. D) downward sloping.