The short-run Phillips curve shows that _____
A) the economy can have low inflation and low unemployment simultaneously.
B) the economy can have high per-capita income and a high interest rate simultaneously.
C) a reduction in per-capita income comes at the expense of lower inflation.
D) a reduction in unemployment comes at the expense of higher inflation.
E) a reduction in inflation comes at the expense of lower exchange rate.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows that there is a trade-off between reducing unemployment and increasing inflation in the short run. This means that a reduction in unemployment comes at the expense of higher inflation. Therefore, the correct choice is D.

The Short-Run Phillips Curve Shows That _____