Some economists argue that there is no such thing as a short-run Phillips curve. Who are these economists and what is their argument?
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 country should export the goods in which it has an absolute advantage
a. True b. False Indicate whether the statement is true or false
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What will be an ideal response?