If the short-run Phillips curve is steep, the inflationary costs of using expansionary policy to reduce unemployment would be substantial.

Question

Quizplus · Accepted Answer

A steep short-run Phillips curve implies that there is a high trade-off between unemployment and inflation. Thus, if expansionary policies are used to reduce unemployment, there will be a significant increase in inflation, leading to substantial inflationary costs.

If the Short-Run Phillips Curve Is Steep, the Inflationary Costs