The tradeoff exhibited by the short-run Phillips curve is
A) higher inflation with higher unemployment.
B) lower inflation with lower unemployment.
C) higher unemployment with lower inflation.
D) changing inflation with constant unemployment.
E) higher price level with lower real GDP.

Question

Quizplus · Accepted Answer

The short-run Phillips curve exhibits a tradeoff between inflation and unemployment, with a downward sloping curve indicating that a lower unemployment rate is associated with a higher inflation rate. Therefore, choice A is incorrect. Similarly, a higher unemployment rate is associated with a lower inflation rate, so choice B is also incorrect. Choice D is incorrect because the Phillips curve shows changing inflation rates, not constant inflation rates. Choice E is incorrect because it refers to the relationship between the price level and real GDP, which is not the focus of the Phillips curve. Therefore, the correct choice is C, which states that the tradeoff exhibited by the short-run Phillips curve is higher unemployment with lower inflation.

The Tradeoff Exhibited by the Short-Run Phillips Curve Is