Answer:
Here are the true and false statements regarding the Phillips Curve:
- a) True
- b) False
- c) False
- d) True
- e) False
- f) False
- g) False
- h) False
- i) True
Step-by-step explanation:
- a) It is true that high inflation and high unemployment can occur at the same time, contradicting the traditional relationship captured by the Phillips Curve.
- b) This statement is false. The multiplier shows the effect of changes in spending or investment on the economy, but not the relation between inflation and unemployment.
- c) This statement is false. The MPC (marginal propensity to consume) is a term used in Keynesian economics to express how an increase in income leads to an increase in consumption spending, but it does not determine the slope of the Phillips Curve.
- d) This statement is true. The MPS (marginal propensity to save) determines the slope of the Phillips Curve, as it captures the relationship between inflation and labor supply. A higher MPS results in a flatter Phillips Curve, while a lower MPS results in a steeper one.
- e) This statement is false. The Phillips Curve does not predict the lowest levels of inflation and unemployment at potential GDP, but rather shows a trade-off between them in the short run.
- f) This statement is false. The Phillips Curve is named after A.W. Phillips, an economist who first observed the inverse relationship between inflation and unemployment in the UK in 1958.
- g) This statement is false. The Phillips Curve is not a pitch, but rather a graphical representation of the relationship between inflation and unemployment.
- h) This statement is false. The Phillips Curve is not constant over time, as factors such as changes in expectations, technology, or monetary policy can affect the trade-off between inflation and unemployment.
- i) This statement is true. The Phillips Curve shows the short run relationship between inflation and unemployment, where a decrease in unemployment is associated with an increase in inflation, and vice versa.