A core belief of modern macroeconomics is that in the short run:

Question

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Modern macroeconomics emphasizes the role of aggregate demand fluctuations in affecting unemployment in the short run. In particular, when aggregate demand falls below potential output, firms reduce production and employment, resulting in an increase in unemployment, and vice versa when aggregate demand exceeds potential output. This relationship is captured by the Phillips curve, which suggests that there is a negative relationship between inflation and unemployment in the short run, due to the inverse relationship between aggregate demand and unemployment. Therefore, fluctuations in aggregate demand do affect unemployment in the short run.

A Core Belief of Modern Macroeconomics Is That in the Short