________ indicates a short-run inverse relationship between inflation and unemployment rates.
A) Stagflation
B) Adaptive expectations theory
C) The Phillips curve
D) Monetary neutrality
E) Rational expectations theory

Question

Quizplus · Accepted Answer

The Phillips curve indicates a short-run inverse relationship between inflation and unemployment rates. As unemployment decreases, inflation increases and vice versa. This relationship is based on the assumption that in the short run, prices and wages are sticky and do not adjust immediately to changes in the economy.

________ Indicates a Short-Run Inverse Relationship Between Inflation and Unemployment