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
Graph of 3 compounds tested
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Trapezoidal Rule Graph