11-8. Based on your answers to Problems 11-6 and
| 11-8. Based on your answers to Problems 11-6 and | ||||||||||
| 11-7, can policymakers stabilize both the price | ||||||||||
| level and real GDP simultaneously in response to | ||||||||||
| a short-lived but sudden rise in oil prices? Explain | ||||||||||
| briefly. (See pages 240–242.) | ||||||||||
| no | ||||||||||
| both GDP and prices cant be maintained at old levels. | ||||||||||
| this refers to the short run tradeoff between inflation and unemployment in the | ||||||||||
| phillips curve concept. | ||||||||||
| we can choose either inflation or unemployment as the goal. | ||||||||||
| if we maintain GDP and not allow unemployment to rise then we have to acceptinflation | ||||||||||
| If we cant acceptinflation and maintain prices, then we have to accepot lower GDP and consequently higher unemployment. | ||||||||||
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