Chapter 17

Question 1

trade off between inflation and unemployment

Answer 1

Illustrated by the Phillips curve, reducing inflation lead to higher unemployment and vice versa

Question 2

short run and long run Phillips curve differences

Answer 2

short-run - inflation and unemployment trade-off. long-run - trade-off diminishes over time, leading to a natural rate of unemployment

Question 3

sacrifice ratios

Answer 3

of % points lost in output in process of reducing inflation by one % point

Question 4

rational expectation theory

Answer 4

people use all their info when forecasting future

Question 5

costs of disinflation

Answer 5

temporary increases in unemployment and uncertainties