What does the short-run Phillips curve indicate about the tradeoff between inflation and unemployment?
What will be an ideal response?
Because the slope of the short-run Phillips curve is negative, the short-run Phillips curve indicates that a tradeoff between inflation and unemployment exists. Lower inflation can be obtained, but the price is higher unemployment. Similarly, lower unemployment is possible but the price is higher inflation.
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Let's assume Ben can produce 3 units of a material good (M) or 3 units of a spiritual good (S) in a day, while Cal can produce 1 M or 2 Ss in a day. Both Ben and Cal can potentially produce a larger combination of M and S
A) if Ben specializes in S and Cal in M and they exchange with one another. B) if Ben specializes in M and Cal in S and they exchange with one another. C) if Ben specializes in both goods and doesn't exchange with Cal. D) only if Cal finds a way to also produce 3 M and 3 S per day.
To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75, the government should decrease taxes by
A. $400 billion. B. $40 billion. C. $120 billion. D. $30 billion.
Which of the following countries has the largest market for domestic bonds?
A) United Kingdom B) United States C) Japan D) China
Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher