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ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Answer the given question with a proper explanation and step-by-step solution.

Transcribed Image Text:6. The short-run inflation-unemployment trade-off
The following graph shows the combinations of unemployment and inflation that existed in the United States from 1961 through 1969.
INFLATION RATE (Percent)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
3.0
3.5
69
68
67
66
4.0
65
+
64 62
63
4.5
5.0 5.5
6.0
UNEMPLOYMENT RATE (Percent)
+
6.5
61
7.0
?

Transcribed Image Text:Hint: Use the graph to answer the following questions. Select any black point (plus symbol) on the graph to get its exact coordinates.
What happened to the inflation rate between the year when the unemployment rate was 5.5% and the year when it was 4.5%?
The inflation rate increased from 4% to 5%.
The inflation rate decreased by 2 percentage points.
The inflation rate increased by 0.5 percentage points.
The inflation rate decreased from 1.9% to 1.5%.
The points on the graph represent observations along the U.S. economy's Phillips curve during the 1960s. If the inflation rate had been 3.5% during
the 1960s, the unemployment rate would most likely have been:
3.7%
O 5.0%
○ 2.8%
O 6.5%
Credo It Now
Sove & Continue
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