How do expectations of higher inflation become embedded in the economy and affect actual inflation?
According to the Phillips Curve,which of the following may have taken place if both the unemployment rate and inflation have risen?
A) a negative supply shock
B) an increase in expected inflation
C) a severe recession
D) a negative demand shock
How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?
A closed economy is one in which
A) investment spending is zero.
B) government spending is zero.
C) there are no imports or exports.
D) demand equals supply in every market.