Why do the unexpected inflation and output gap axes need to extend into the negative regions in the Phillips curve diagram?
A)Both output gaps and unexpected inflation can be negative or positive.
B)Both output gaps and unexpected inflation always begin by being negative.
C)Negative inflation gaps are very common.
D)Negative output gaps are very common.

Question

Quizplus · Accepted Answer

Both output gaps and unexpected inflation can be negative or positive. Therefore, the axes need to extend into the negative regions to accurately represent the possible range of values for these variables.

Why Do the Unexpected Inflation and Output Gap Axes Need