Suppose that last year the unemployment rate was 5 percent and the inflation rate was 2.5 percent. If the natural rate of unemployment is 5 percent, how do you expect inflation to change?
What will be an ideal response?
Inflation is stable when the unemployment rate is equal to the natural rate of unemployment. Since last year's unemployment rate was equal to the natural rate of unemployment, the inflation rate should not change.
You might also like to view...
The statement "American workers are lazy" is an example of positive economic analysis
a. True b. False Indicate whether the statement is true or false
To ensure interest rate parity, a decrease in the interest rate on Euroyen relative to Eurodollar deposits will require a greater expected appreciation of the Japanese yen against the U.S. dollar
a. True b. False Indicate whether the statement is true or false
What would the Bank of England (England's Central Bank) do to raise the value of the British pound in terms of the euro?
a. It would simply announce its desired exchange rate for the British Pound, and the market forces of supply and demand would do the rest. No further action would be necessary. b. It has no influence over the pound exchange rate. c. It would buy British pounds and supply euros in the foreign exchange market. d. It would buy euros and supply British pounds in the foreign exchange market. e. It would sell dollars and buy euros.
The traditional mortgage amortization schedule specifies a monthly payment that is
A. first increasing, then decreasing over the life of the mortgage. B. constant over the life of the mortgage. C. increasing over the life of the mortgage. D. decreasing over the life of the mortgage.