The relationship between the AS-AD model and the Phillips curve points out that as aggregate demand increases,the unemployment rate

Question

Quizplus · Accepted Answer

The Phillips curve suggests an inverse relationship between unemployment rate and inflation rate, while the AD curve shows a direct relationship between aggregate demand and price level. As aggregate demand increases, there is a tendency for a decrease in unemployment rate and an increase in inflation rate. Hence, the correct answer is C, i.e., as aggregate demand increases, the unemployment rate decreases, and the inflation rate rises.

The Relationship Between the AS-AD Model and the Phillips Curve