A trade-off between aggregate output and inflation
A) is theoretically possible, but has never been observed in practice.
B) sometimes exists, but is unstable.
C) sometimes exists, and is stable.
D) is not theoretically possible, and is not observed in practice.
E) is the basis for fiscal policy.

Question

Quizplus · Accepted Answer

The trade-off between aggregate output and inflation is sometimes observed in the short run, as described by the Phillips Curve, but it is considered unstable due to factors like expectations and supply shocks.

A Trade-Off Between Aggregate Output and Inflation