Even if expectations of inflation are rational, sluggish adjustment of wages and prices will still create a short-run trade-off between inflation and unemployment
Indicate whether the statement is true or false
TRUE
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The figure above shows the production possibilities frontier for a country. A combination of 3 million gallons of milk and 3 million gallons of ice cream is
A) unattainable and production efficient. B) unattainable. C) attainable and production inefficient. D) attainable and production efficient. E) More information is needed to determine if the point is attainable or not.
Classicals argue that an adverse supply shock would
A) raise neither the natural rate of unemployment nor the actual rate of unemployment. B) raise the actual rate of unemployment, but not the natural rate of unemployment. C) raise the natural rate of unemployment, but not the actual rate of unemployment. D) raise both the natural rate of unemployment and the actual rate of unemployment.
Refer to Figure 14.2. Suppose workers expect inflation to rise from 1% to 3% next year. Other things equal, this would best be represented by a movement from
A) point A to point B. B) point B to point A. C) point B to point C. D) point A to point C.
A customs union is an organization of nations whose members:
a. have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers. b. have no trade barriers among themselves but impose common trade barriers on nonmembers. c. have no trade barriers among themselves but each member country chooses its own trade policies with nonmember countries. d. retaliate each other by raising reciprocal tariffs and calling for fair trade. e. neither have trade barriers among themselves nor impose any restriction on the nonmember countries.