Comparing the aggregate supply curve and the short-run Phillips curve, we see that they
A)both exist since money wages are flexible.
B)describe the same phenomena but contradict each other.
C)both exist because money wage rate is fixed in the short run.
D)each describe different parts of the economy.
E)both exist because real wage rate is fixed in the short run.

Question

Quizplus · Accepted Answer

The short-run Phillips curve describes the relationship between inflation and unemployment in the short run, when money wages are fixed. The aggregate supply curve describes the relationship between the price level and the quantity of output supplied in the economy. Both curves exist because money wages are fixed in the short run.

Comparing the Aggregate Supply Curve and the Short-Run Phillips Curve