The short-run Phillips curve is:
A) upward sloping because inflation and unemployment rates have a positive relationship in the short run.
B) vertical because there is no trade-off between inflation and unemployment rates in the short run.
C) downward sloping because there is a trade-off between inflation and unemployment rates in the short run.
D) horizontal because there is no trade-off between inflation and unemployment rates in the short run.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the trade-off between inflation and unemployment rates in the short run. As unemployment decreases, inflation tends to increase, resulting in a downward sloping curve. However, in the long-run, there is no trade-off between inflation and unemployment rates and the Phillips curve becomes vertical.

The Short-Run Phillips Curve Is