Moving along the short-run Phillips curve indicates
A) that higher inflation leads to a higher unemployment rate.
B) that higher unemployment leads to a higher inflation rate.
C) a tradeoff between inflation and unemployment so that higher inflation is related to lower unemployment.
D) that the natural unemployment rate falls when the inflation rate rises.

Question

Quizplus · Accepted Answer

The short-run Phillips curve illustrates a tradeoff between inflation and unemployment, suggesting that higher inflation is associated with lower unemployment. This relationship is based on the idea that in the short run, increasing demand in an economy can lead to both higher prices (inflation) and lower unemployment.

Moving Along the Short-Run Phillips Curve Indicates