Chapter 35 - The Short-Run Trade-Off Between Inflation and Unemployment

Vocabulary
Phillips Curve Natural-Rate Hypothesis Supply Shock Sacrifice Ratio Rational Expectations
 * Definition: A curve that shows the short-run trade-off between inflation and unemployment.
 * What It Means:
 * Definition: The claim that unemployment eventually returns to its normal, or natural, rate, regardless of the rate of inflation.
 * What It Means:
 * Definition: An event that directly alters firms' costs and prices, shifting the economy's aggregate-supply curve and thus the Phillips curve.
 * What It Means:
 * Definition: The number of percentage points of annual output lost in the process of reducing inflation by 1 percentage point. 
 * What It Means:
 * Definition: The theory that people optimally use all the information they have, including information about government policies, when forecasting the future.
 * What It Means: