-The short-run Phillips curve tradeoff becomes less favorable if either
A) the expected inflation rate increases or the natural unemployment rate decreases.
B) the expected inflation rate or the natural unemployment rate increases.
C) potential GDP or the natural unemployment rate increases.
D) the level of real GDP decreases or the natural unemployment rate decreases.
E) potential GDP or the natural unemployment rate decreases.

Question

-The short-run Phillips curve tradeoff becomes less favorable if either
A) the expected inflation rate increases or the natural unemployment rate decreases. 
B) the expected inflation rate or the natural unemployment rate increases. 
C) potential GDP or the natural unemployment rate increases. 
D) the level of real GDP decreases or the natural unemployment rate decreases. 
E) potential GDP or the natural unemployment rate decreases.

Quizplus · Accepted Answer

The short-run Phillips curve tradeoff becomes less favorable when the expected inflation rate or the natural unemployment rate increases, as both lead to higher inflation for any given level of unemployment.

-The Short-Run Phillips Curve Tradeoff Becomes Less Favorable If Either