If the short-run Phillips curve is fairly horizontal, attempts to fight inflation will generate considerable unemployment.

Question

Quizplus · Accepted Answer

If the short-run Phillips curve is fairly horizontal, it indicates that there is a small trade-off between inflation and unemployment. Therefore, any attempt to fight inflation by reducing the money supply or increasing taxes will result in a large increase in unemployment. This is because a small reduction in inflation will require a significant increase in unemployment to achieve.

If the Short-Run Phillips Curve Is Fairly Horizontal, Attempts to Fight