The next questions refer to the following.
Suppose that, in the absence of supply shocks, the inflation-unemployment relationship is inflation rate = expected inflation rate + 2(natural rate of unemployment - actual unemployment rate).
-A reasonable stabilization policy in these circumstances would involve
A) increasing the inflation rate to .06
B) reducing inflation through demand management
C) raising interest rates
D) shifting the short run Phillips Curve outward
E) an increase of .02 in the income tax rate

Question

Quizplus · Accepted Answer

The Answer of The next questions refer to the following.
Suppose that, in the absence of supply shocks, the inflation-unemployment relationship is inflation rate = expected inflation rate + 2(natural rate of unemployment - actual unemployment rate).
-A reasonable stabilization policy in these circumstances would involve
A) increasing the inflation rate to .06
B) reducing inflation through demand management
C) raising interest rates
D) shifting the short run Phillips Curve outward
E) an increase of .02 in the income tax rate

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