When people became less concerned with the underlying value of their houses and instead focused on the expectations of the prices of their houses increasing, ________ occurred.
A) an automatic destabilizer B) a housing bubble
C) a supply shock D) stagflation
Question 2
Refer to Figure 28-7. Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds.
If the assumptions of the rational expectations school hold true, and the Fed's announcement is credible, the rate of unemployment will be ________ in the short run.
A) less than 5.5 percent B) 5.5 percent
C) between 5.5 and 7.5 percent D) 7.5 percent
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