Along a short-run Phillips curve, the
A) short-run cost of lower unemployment is higher inflation.
B) short-run benefit of lower unemployment is lower inflation.
C) short-run cost of lower inflation is higher interest rates.
D) long-run cost of lower inflation is higher unemployment.
E) short-run cost of higher inflation is a higher real interest rate.

Question

Quizplus · Accepted Answer

Along a short-run Phillips curve, there is an inverse relationship between unemployment and inflation. Therefore, a decrease in unemployment leads to an increase in inflation, and vice versa. The short-run cost of achieving lower unemployment is therefore higher inflation.

Along a Short-Run Phillips Curve, the