Author Question: Assume a country is closed. Given this information, which of the following must occur? A) demand ... (Read 177 times)

Redwolflake15 · **on:** Jun 30, 2018

Assume a country is closed. Given this information, which of the following must occur?

A) demand for domestic goods will be less than the domestic demand for goods
B) demand for domestic goods will be greater than the domestic demand for goods
C) S + T = I + G
D) a budget surplus exists
E) S = I

Question 2

Based on the 'early incarnation' of the Phillips curve, explain what effect a decrease in the unemployment rate will have on the inflation rate.

What will be an ideal response?

Andromeda18 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

An decrease in u will cause a rise in W. As W rises, firms' costs increase. As firms' costs increase, they will raise the price level. This increase in the price level represents, in this case, inflation.