The Phillips curve shows the relationship between
A)lagging an leading variables.
B)money prices and aggregate economic activity.
C)real and nominal interest rates.
D)procyclical and countercyclical variables.
E)real and nominal GDP.

Question

Quizplus · Accepted Answer

The Phillips curve shows the relationship between money prices, represented by inflation rates, and aggregate economic activity, represented by the unemployment rate. It suggests that there is a trade-off between inflation and unemployment in the short run, implying that when inflation rises, unemployment falls and vice versa. Therefore, the best choice is B, which directly represents the variables that are portrayed in the Phillips curve.

The Phillips Curve Shows the Relationship Between