-Exhibit 16.5 shows a Phillips curve. Beginning at point a, if fiscal or monetary policy is used to stimulate output and thereby reduce unemployment, the economy will move from _____
A) point a to point b.
B) point b to point a.
C) point a to point c.
D) point a to point d.
E) point c to point d.

Question

-Exhibit 16.5 shows a Phillips curve. Beginning at point a, if fiscal or monetary policy is used to stimulate output and thereby reduce unemployment, the economy will move from _____
A) point a to point b. 
B) point b to point a. 
C) point a to point c. 
D) point a to point d. 
E) point c to point d.

Quizplus · Accepted Answer

The Phillips curve illustrates the inverse relationship between unemployment and inflation. Stimulating output to reduce unemployment typically leads to higher inflation, moving the economy from a lower inflation, higher unemployment point (a) to a higher inflation, lower unemployment point (b).