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3 Feb 2018

If workers accurately predict the rate of inflation, is there a short run trade-off between inflation and unemployment, as predicted by the Phillips curve? Why or why not?

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Related questions

An increase in expected inflation

a. shifts the short-run Phillips curve upward, and the unemployment-inflation trade-off is more favorable.

b. shifts the short-run Phillips curve downward, and the unemployment-inflation trade-off is more favorable.

c. shifts the short-run Phillips curve downward, and the unemployment-inflation trade-off is less favorable.

d. shifts the short-run Phillips curve upward, and the unemployment-inflation trade-off is less favorable.

amaranthwater-buffalo828

The long-run Phillips curve is:

A. the same as the short-run Phillips curve.

B. negatively sloped, showing an inverse relationship between unemployment and inflation.

C. unrelated to the NAIRU.

D. vertical at the nonaccelerating inflation rate of unemployment (NAIRU).

byzantiummole828

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.