Demand-side inflation results in a downward-sloping Phillips curve when the
A) aggregate demand curve slopes downward.
B) aggregate supply curve shifts to the left.
C) aggregate demand curve does not shift to the right or the left.
D) aggregate supply curve slopes upward.
E) price level is constant.

Question

Quizplus · Accepted Answer

A downward-sloping Phillips curve suggests an inverse relationship between inflation and unemployment. This occurs when the aggregate supply curve slopes upward, as increases in aggregate demand lead to higher output and employment, reducing unemployment but increasing inflation.

Demand-Side Inflation Results in a Downward-Sloping Phillips Curve When the