Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, the change in ________ would increase less in Economy ________.
A) inflation; 2
B) unemployment; 1
C) unemployment; 2
D) interest rates; 1
E) Not enough information is given.

Question

Quizplus · Accepted Answer

The Phillips curve illustrates the trade-off between inflation and unemployment, with a steeper curve indicating a more significant change in inflation for a given change in unemployment. Therefore, in an economic expansion, inflation would increase less in Economy 2 with a gently sloped Phillips curve compared to Economy 1.

Consider Two Economies