Due to historical differences, countries often differ in how quickly a change in
ID: 1166047 • Letter: D
Question
Due to historical differences, countries often differ in how quickly a change in actual inflation is incorporated into a change in expected inflation. In a country such as Japan, which has had very little inflation in recent memory, it will take longer for a change in the actual inflation rate to be reflected in a corresponding change in the expected inflation rate. In contrast, in a country such as Zimbabwe, which has recently had very high inflation, a change in the actual inflation rate will immediately be reflected in a corresponding change in the expected inflation rate.
Which of the following statements is true in regards to the short-run and long-run Phillips curves in these two types of countries?
a)Japan has a horizontal Phillips curve in the long run.
b)Both countries experience a vertical Phillips curve in both the short and long run.
c)Zimbabwe has a horizontal Phillips curve in the short run.
c)Both countries experience a vertical Phillips curve in the long run.
Explanation / Answer
japan has lonrun vartical philips curve.
Zimbabwe has shortrun vartical philips curve
Ans: b) both countries experience a vartical philips curve in both the short run and long run.