When inflation expectations are stable, the Phillips curve:
A) is a vertical line.
B) shows a negative relationship between inflation and unemployment.
C) is a horizontal line.
D) shows a positive relationship between inflation and unemployment.

Question

Quizplus · Accepted Answer

When inflation expectations are stable, the Phillips curve shows a negative relationship between inflation and unemployment, indicating that lower unemployment can lead to higher inflation and vice versa.

When Inflation Expectations Are Stable, the Phillips Curve