Based on the 'early incarnation' of the Phillips curve, explain what effect a decrease in the unemployment rate will have on the inflation rate
What will be an ideal response?
An decrease in u will cause a rise in W. As W rises, firms' costs increase. As firms' costs increase, they will raise the price level. This increase in the price level represents, in this case, inflation.
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A monopolistically competitive firm that earns economic profits in the short run will be able to expand its market share even if the market size remains constant
Indicate whether the statement is true or false
Over a ten year period, the monthly charge for cellular phone service decreased from $120 per month to $30 per month. At the same time, the number of subscribers increased from less than 10 million to more than 75 million. Which of the following provides the best explanation for these changes?
a. An increase in consumer income over this ten year period b. A reduction in the price of residential phone service, a substitute for cellular phone service c. An increase in the wages of workers in the cellular phone industry d. Technological improvements that reduced the cost of supplying cellular phone service
Refer to the list. The outcome in a monopsony labor market is shown by:
1. W < MRP; W < MRC 2. W = MRP; W < MRC 3. W = MRP; W = MRC 4. W > MRP; W > MRC A. 1. B. 2. C. 3. D. 4.
Suppose that you borrow $100,000 from the bank to purchase some land and you agree to pay 2 percent interest on the loan. If the loan must be repaid in 12 months and the inflation rate is 4 percent during the year, then
A. you will repay the bank with fewer dollars than the bank initially loaned you. B. the bank will receive fewer dollars, because of inflation, than it had initially expected to receive. C. you will repay the bank with dollars with more purchasing power than you initially borrowed. D. you will repay the bank with dollars with less purchasing power than it initially loaned you.