2) Suppose an economy is operating with an inflationary gap. In this case, polic

Question

2) Suppose an economy is operating with an inflationary gap. In this case, policymakers would seek to move the economy

back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.

up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.

up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.

up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.

up the Phillips curve, trading a reduction in inflation for an increase in unemployment.

Explanation / Answer

Ans: back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.

Explanation:

In this situation, the policy makers seek to move the economy back down the Phillips curve toward an unemployment rate that is closer to the natural rate of unemployment.

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