Some economists argue that there is no such thing as a short-run Phillips curve. Who are these economists and what is their argument?
What will be an ideal response?
The theory of rational expectations disavows a short-run trade-off between inflation and unemployment. Economists holding this theory maintain that households and businesses recognize the full impact of aggregate demand increases. They know that more AD will lead to higher price levels and so they negotiate higher wages whenever the government increases AD. As a result, increases in AD are offset by decreases in AS. Job creation cancels out, but the combination of higher AD and lower AS increases the price level. Hence, the Phillips curve is vertical at the natural rate of unemployment, even in the short run.
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A) monetary; inflation B) inflation; monetary C) monetary; exchange rate D) monetary; nominal GDP
The central bank of a country alters the quantity of money in a way that affects the supply curve in the market for loanable funds. In this way, it is able to change the interest rates
a. True b. False Indicate whether the statement is true or false
What effect do protectionist policies have on the trade deficit?
The current Medicare system is designed so that it actually encourages
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