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The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:
- a)there is a direct and strong relationship between GDP growth rate and inflation.
- b)increased sensitivity of wage rates to unemployment.
- c)reduced sensitivity of inflation to economic conditions.
- d)high levels of employment can be achieved only at high levels of inflation.
Correct answer is option 'C'. Can you explain this answer?
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The flattening of the Phillips curve is a vigorously investigated phe...
Explanation:
Reduced Sensitivity of Inflation to Economic Conditions:
- A flattened Phillips curve indicates that there is a reduced sensitivity of inflation to economic conditions.
- In the past, the Phillips curve suggested a trade-off between inflation and unemployment, where lower unemployment was associated with higher inflation.
- However, in recent years, this relationship has weakened, and inflation has become less responsive to changes in economic conditions such as unemployment.
Reasons for the Flattening of the Phillips Curve:
- Globalization has increased competition, leading to lower inflationary pressures.
- Technological advancements have improved productivity and reduced production costs, keeping inflation in check.
- Central banks' focus on inflation targeting has also contributed to the flattening of the Phillips curve.
Implications of a Flattened Phillips Curve:
- Policymakers may find it challenging to stimulate economic growth without triggering high inflation.
- It may lead to a reevaluation of traditional monetary policy tools and strategies.
- The relationship between unemployment and inflation may no longer be as reliable for predicting economic outcomes.
In conclusion, a flattened Phillips curve signifies a reduced sensitivity of inflation to economic conditions, posing challenges for policymakers in managing inflation and unemployment levels in the economy.
Reduced Sensitivity of Inflation to Economic Conditions:
- A flattened Phillips curve indicates that there is a reduced sensitivity of inflation to economic conditions.
- In the past, the Phillips curve suggested a trade-off between inflation and unemployment, where lower unemployment was associated with higher inflation.
- However, in recent years, this relationship has weakened, and inflation has become less responsive to changes in economic conditions such as unemployment.
Reasons for the Flattening of the Phillips Curve:
- Globalization has increased competition, leading to lower inflationary pressures.
- Technological advancements have improved productivity and reduced production costs, keeping inflation in check.
- Central banks' focus on inflation targeting has also contributed to the flattening of the Phillips curve.
Implications of a Flattened Phillips Curve:
- Policymakers may find it challenging to stimulate economic growth without triggering high inflation.
- It may lead to a reevaluation of traditional monetary policy tools and strategies.
- The relationship between unemployment and inflation may no longer be as reliable for predicting economic outcomes.
In conclusion, a flattened Phillips curve signifies a reduced sensitivity of inflation to economic conditions, posing challenges for policymakers in managing inflation and unemployment levels in the economy.
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The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer?
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The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer?.
The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The flattening of the Phillips curve is a vigorously investigated phenomenon in many advanced economies. A flattened Phillips curve implies:a)there is a direct and strong relationship between GDP growth rate and inflation.b)increased sensitivity of wage rates to unemployment.c)reduced sensitivity of inflation to economic conditions.d)high levels of employment can be achieved only at high levels of inflation.Correct answer is option 'C'. Can you explain this answer?.
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