Figure 15-4

-Refer to Figure 15-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?
A) It will rise.
B) It will fall.
C) It will remain constant.
D) not enough information to answer the question

Question

Figure 15-4
 
-Refer to Figure 15-4.Given the economy is at point A in year 1,what will happen to the price level in year 2?
A) It will rise. 
B) It will fall. 
C) It will remain constant. 
D) not enough information to answer the question

Quizplus · Accepted Answer

According to the Phillips curve, there is an inverse relationship between unemployment and inflation. At point A, the unemployment rate is low, and the economy is at or near full employment. In year 2, the economy will move along the Phillips curve to a point with higher inflation and lower unemployment, indicating an increase in the price level. Therefore, the answer is A.

Figure 15-4 -Refer to Figure 15-4.Given the Economy Is at Point a Is