The shape of the Phillips curve suggests that policies that are aimed at reducing unemployment are likely to cause inflation.

Question

Quizplus · Accepted Answer

The Phillips curve shows an inverse relationship between unemployment and inflation, which implies that reducing unemployment may lead to increased inflation. This is because lower unemployment usually means that there is increased demand for goods and services, which can lead to higher prices. Policymakers often use the Phillips curve as a tool to guide their decisions on whether to prioritize reducing unemployment or controlling inflation.

The Shape of the Phillips Curve Suggests That Policies That