Which of the following is illustrated by the short-run Phillips curve?
A) The economy can have low inflation and low unemployment simultaneously.
B) The economy can have high inflation and high unemployment simultaneously.
C) A reduction in unemployment comes at the expense of lower inflation.
D) A reduction in unemployment comes at the expense of higher inflation.

Question

Which of the following is illustrated by the short-run Phillips curve?  
A) The economy can have low inflation and low unemployment simultaneously. 
B) The economy can have high inflation and high unemployment simultaneously. 
C) A reduction in unemployment comes at the expense of lower inflation. 
D) A reduction in unemployment comes at the expense of higher inflation.

Quizplus · Accepted Answer

The short-run Phillips curve illustrates that there is an inverse relationship between unemployment and inflation in the short run. As unemployment decreases, the demand for labor increases and wages rise, causing firms to increase their prices to maintain profits. This leads to higher inflation. Therefore, a reduction in unemployment in the short run comes at the expense of higher inflation.

Which of the Following Is Illustrated by the Short-Run Phillips