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8 Cards in this Set

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phillips curve
a curve that shows the short run tradeoff between inflation and unemployment
the phillips curve simply shows the combination of inflation and unemployment that arise in the short run as shifts in the AD curve move the economy along the SRAS curve
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espected inflation measures how much ppl expect the overall price level to change
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friedman and phels concluded that plicy makers do face a tradeoff btw inflation and unemployment but only a temporary one
-if policy makers use this tradeoff they loose it
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natural rate hypothesis
the claim that U evenually reurns to its normal or natural rate regardless of the rate of inflation
supply shock
an event that directly alters firms costs and prices, shifting the economy's AS curve and thus the phillips curve
sacrifice ratio
the # of percentage points of annual output lost in the process of reducing infation by 1 percentage point
rational expections
the theory according to which ppl optimally use all the info they have, including info about govt policies when forcasting the future