Question

57. According to the modern Phillips Curve, current inflation statistically is the summation of: (a) the real inflation rate and inflation expectations; (b) the previous period’s inflation and the product of short-run real economic growth and the sensitivity of inflation to it; (c) productivity growth and growth in the labor force; (d) labor compensation and productivity growth.

58. Almost always, the normal Treasury yield curve tends to: (a) be unaffected by monetary policy; (b) be monotonically upward sloping; (c) demonstrate that as time to maturity increases, expected yields tend to decline: (d) be affected by inflation expectations.

Answer 1

(57). According to the modern Phillips curve , current inflation statistically is the summation of the real inflation rate and inflation expectations .

Today, modified forms of the Phillips curve that take inflationary expectations into account remain influential for current inflation.

(58). Almost always, the normal Treasury yield curve tends to be affected by inflation expectations .

Number of economic factors influence Treasury yields, such as interest rates, economic growth and inflation. All of these factors tend to influence each other as well.