Examining data on cyclical unemployment plotted against unanticipated inflation shows
A)a positive relationship.
B)a negative relationship.
C)no significant relationship.
D)a relationship only during the 1960s.

Question

Quizplus · Accepted Answer

Empirical evidence suggests that there is a negative relationship between cyclical unemployment and unanticipated inflation. This means that as unanticipated inflation increases, cyclical unemployment decreases, and vice versa. This is because unanticipated inflation can lead to lower real wages, which encourages firms to hire more workers and reduce cyclical unemployment.

Examining Data on Cyclical Unemployment Plotted Against Unanticipated Inflation Shows