Suppose an economy is operating with a recessionary gap. In this case, policymakers would seek to move the economy
A) back down the Phillips curve, trading a reduction in inflation for an increase in unemployment.
B) up the Phillips curve, trading a reduction in inflation for an increase in unemployment.
C) back down the Phillips curve, trading a reduction in unemployment for an increase in inflation.
D) up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

Question

Quizplus · Accepted Answer

In a recessionary gap, there is high unemployment and low inflation. Policymakers would seek to move the economy up the Phillips curve, trading a reduction in unemployment for an increase in inflation.

Suppose an Economy Is Operating with a Recessionary Gap