Refer to Figure 17-7.Consider the Phillips curves depicted in ...

[tsand2]

Question 1

Figure 17-7









Refer to Figure 17-7. 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 expectations of inflation are reduced to 8 percent by the Fed's announcement, the rate of unemployment will be ________ in the short run.

◦ less than 5.5 percent
◦ 5.5 percent
◦ between 5.5 and 7.5 percent
◦ 7.5 percent

Question 2

Figure 17-7









Refer to Figure 17-7. 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.

◦ less than 5.5 percent
◦ 5.5 percent
◦ between 5.5 and 7.5 percent
◦ 7.5 percent

[dominiqueenicolee]

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