The short-run Phillips curve is based upon labor contracts that reflect a given expected _____.
A)price level
B)unemployment level
C)money supply
D)aggregate demand
E)unemployment rate

Question

Quizplus · Accepted Answer

The short-run Phillips curve is based upon labor contracts that reflect a given expected price level, which means that workers and firms expect a certain level of inflation when they negotiate wages. Therefore, changes in actual inflation relative to expected inflation can affect unemployment in the short run.

The Short-Run Phillips Curve Is Based Upon Labor Contracts That