If inflation can be predicted in advance it is called as
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Which of the following describes a situation in which the person is hurt by inflation?
a. A person who borrows money during a period when inflation is under-predicted.
b. A person who lends money during a period when inflation is over-predicted.
c. A person paid a fixed income during an inflationary period.
d. A retiree whose pension is adjusted for inflation.
Ā
The above graph depicts the short-run and long-run Phillips Curves for a hypothetical economy in macroeconomic equilibrium at point A, where the natural rate of unemployment is 4% and the current inflation rate is 10% per year.
Suppose that the central bank in this economy is concerned that the inflation is too high, and wants to lower the inflation rate by 4 percentage points per year. A reduction in the rate of inflation is called _____. To reduce inflation from 10% to 6% in the short-run, the central bank would have to accept an unemployment rate of _%
True or false: If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve.Ā
