The Phillips curve provides a theoretical link between
A)inflation and the demand for money.
B)the goods market and the labour market.
C)the liquidity preference and investment demand schedules.
D)the goods market and productivity.
E)labour markets and foreign- exchange markets.

Question

Quizplus · Accepted Answer

The Phillips curve provides a theoretical link between the goods market and the labour market by describing the inverse relationship between unemployment and inflation. The curve suggests that as unemployment decreases, inflation increases and vice versa. This is because when the labour market is tight and there are few workers available, employers are forced to increase wages to attract workers, which leads to higher costs for businesses and ultimately higher prices for goods and services. On the other hand, in times of high unemployment, workers are more willing to accept lower wages and there is less pressure on businesses to increase prices.

The Phillips Curve Provides a Theoretical Link Between