The traditional Phillips Curve suggests that, if government uses an expansionary fiscal policy to stimulate output and employment,
A)unemployment may actually increase because of the crowding-out effect.
B)tax revenues may increase even though tax rates have been reduced.
C)the inflation rate will increase.
D)the natural rate of unemployment may fall.

Question

Quizplus · Accepted Answer

The traditional Phillips Curve suggests an inverse relationship between inflation and unemployment, meaning that as the government uses expansionary fiscal policy to stimulate the economy, unemployment decreases but inflation increases.

The Traditional Phillips Curve Suggests That, If Government Uses an Expansionary