There is a trade-off between unemployment and inflation when the aggregate
A)Supply curve is upward-sloping.
B)Supply curve is downward-sloping.
C)Supply curve is vertical.
D)Demand curve is upward-sloping.

Question

Quizplus · Accepted Answer

When the aggregate supply curve is upward-sloping, an increase in aggregate demand will lead to an increase in output and employment in the short-run but higher prices and ultimately inflation in the long-run. On the other hand, a decrease in aggregate demand could lead to lower prices and unemployment in the short-run. Therefore, there is a trade-off between unemployment and inflation.

There Is a Trade-Off Between Unemployment and Inflation When the Aggregate