The short-run Phillips curve represents the relationship between the unemployment rate and the rate of change in:
A) the interest rate.
B) output.
C) wages only.
D) the aggregate price level.

Question

Quizplus · Accepted Answer

The short-run Phillips curve represents the trade-off between inflation and unemployment, and therefore the rate of change in the aggregate price level is the variable that is plotted on the vertical axis. The slope of the Phillips curve shows the responsiveness of inflation to changes in unemployment, and is influenced by factors such as inflation expectations, supply shocks, and wage bargaining power. The interest rate, output, and wages may all be affected by shifts in the Phillips curve, but they are not the primary variables that are represented by it.

The Short-Run Phillips Curve Represents the Relationship Between the Unemployment