An increase in expected inflation ?
Correct answer: D. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable
- A. shifts the short run Phillips curve downward and the unemployment inflation trade-off is less favorable.
- B. shifts the short-run Phillips curve upward and the unemployment inflation trade-off is more favorable
- C. Shift the short-run Phillips curve downward and the unemployment inflation trade-off is more favorable
- D. Shifts the Short run Phillips curve upward and the unemployment inflation trade-off is less favorable
Explanation
Higher expected inflation shifts the short-run Phillips curve upward because a given unemployment rate is associated with higher actual inflation. The trade-off becomes less favorable because inflation is higher at every unemployment rate.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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