State and briefly explain whether or not the empirical evidence generally supports the belief that there is a fixed trade-off between unemployment and inflation, such that monetary policymakers can achieve the combination they prefer
What will be an ideal response?
The Phillips curve suggests that there is a stable set of unemployment rate and inflation rate combinations, and that monetary policymakers could achieve the combination they prefer. The macroeconomic data for the 1950s and 1960s for many countries seemed consistent with this view, but further research using data for the 1970s and 1980s failed to show that a stable trade-off exists. The empirical evidence suggests that a stable trade-off exists only during the time period in which expected inflation and the natural unemployment rate remain unchanged. The extended classical model suggests that a nonsystematic expansionary monetary policy attempt to move up a fixed expectations-augmented Phillips curve to a lower unemployment rate and higher inflation rate will achieve its objective only for the short-run period in which the increase in inflation is not anticipated. Systematic monetary policies will be anticipated, so they cannot achieve their objective of temporarily reducing unemployment below the natural unemployment rate.
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A) create public-works programs. B) break up monopolies. C) enforce rules of exchange. D) reduce economic uncertainty.
A commitment device is:
A. an arrangement entered into by an individual with the aim of helping fulfill a plan for future behavior that would otherwise be difficult. B. a way to deal with time inconsistency. C. something that helps people conquer their vices. D. All of these are true.
Which of the following is true about a monopoly?
a. A monopoly charges a higher price and produces a lower output level than if the market were competitive. b. A monopoly is guaranteed an economic profit. c. A monopoly charges the highest possible price. d. A monopoly will shut down whenever losses are incurred. e. All of these.
Economists assume that a perfectly competitive firm's objective is to maximize its
a. revenue b. quantity sold c. economic profit d. output price