As an economist you observe that as inflation (the rate of increase in the price level) falls unemployment rises.What can you say in regards to this observation?
A)The decrease in inflation caused unemployment to rise.
B)The increase in unemployment cased inflation to decrease.
C)Both a and B
D)Without an economic theory, it is not possible to imply causality from this observation.

Question

Quizplus · Accepted Answer

The observation alone does not allow for a determination of causality between inflation and unemployment without an underlying economic theory, such as the Phillips Curve, which suggests an inverse relationship between the two. However, correlation does not imply causation, and additional analysis would be required to establish a causal link.

As an Economist You Observe That as Inflation (The Rate