The Phillips curve is an empirical relation which states that:
A) when unemployment becomes high, this leads to downward pressure on bond prices.
B) when unemployment becomes high, this leads to upward pressure on inflation.
C) when unemployment becomes high, this leads to downward pressure on stock prices.
D) when unemployment becomes low, this leads to downward pressure on inflation.
E) when unemployment becomes low, this leads to upward pressure on inflation.

Question

Quizplus · Accepted Answer

The Phillips curve states that when unemployment becomes low, this leads to upward pressure on inflation. This is often referred to as the trade-off between unemployment and inflation. When unemployment is low, there is high demand for workers, which can drive up wages and production costs, leading to higher prices for goods and services.

The Phillips Curve Is an Empirical Relation Which States That