Suppose that businesses become less optimistic about the future. Assuming no change in inflation expectations, how would the effects of this shock be shown on the Phillips curve diagram and what would happen to inflation and unemployment?
The decrease in spending is shown as a downward movement along the short-run Phillips curve. The unemployment rate would rise and the inflation rate would fall.
You might also like to view...
A marginal external cost of a product is equal to
A) what the producer has to pay to hire resources to produce another unit. B) the cost someone other than the producer incurs when another unit is produced. C) the cost the producer incurs to produce another unit. D) what the consumer must pay when he or she buys the good or service. E) None of these answers describes a marginal external cost.
Over the past 160 years in the United States, life expectancy
A) increased up to the 1950s and then declined for the next 60 years. B) has more than doubled. C) has slightly declined. D) has remained fairly constant.
How are Treasury bond prices affected when the interest rate falls?
a. The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. b. The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must increase. c. The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year, so the price of the bond must decrease. d. The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase.
Store of value