When inflation comes from the supply side, inflation and unemployment are positively correlated. Does this mean that monetary and fiscal policymakers can escape the trade-off between inflation and unemployment?
What will be an ideal response?
No. Shifts of the aggregate supply curve can cause inflation and unemployment to rise or fall together, and thus can destroy the statistical Phillips curve relationship. Nevertheless, anything that monetary and fiscal policy can do will make unemployment and inflation move in opposite directions because monetary and fiscal policies influence only the aggregate demand curve, not the aggregate supply curve. Thus, no matter what the source of inflation, and no matter what happens to the Phillips curve, the monetary and fiscal policy authorities still face a disagreeable trade-off between inflation and unemployment.
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If the Fed wanted to decrease the money supply, one way to make an enormous impact would be to:
A. increase the reserve requirement, which would decrease the money multiplier. B. decrease the reserve requirement, which would decrease the money multiplier. C. increase the reserve requirement, which would increase the money multiplier. D. decrease the reserve requirement, which would increase the money multiplier.
The order of payment of corporate earnings is bondholders, preferred stockholders, convertible stockholders, and finally common stockholders
Indicate whether the statement is true or false
The theory of consumer choice examines
a. the determination of output in competitive markets. b. the tradeoffs inherent in decisions made by consumers. c. how consumers select inputs into manufacturing production processes. d. the determination of prices in competitive markets.
Which of the following examples shows a shortage?
a. At $50 per watch, a company produces 10,000 watches and sells the same amount. b. At $50 per watch, a company produces 10,000 watches and has a demand for 100 more. c. At $50 per watch, a company produces 5,000 watches and sells 4,998. d. At $50 per watch, a company produces 5,000 watches and sells 1,000.