The idea behind the Phillips curve is that ________.
A)tightness in the labor market puts downward pressures on wages and prices
B)when the unemployment rate is low wages will increase
C)when firms raise wages to attract new workers,prices decrease
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The Phillips curve suggests that there is an inverse relationship between the unemployment rate and wages, such that when the unemployment rate is low, the competition for workers leads to higher wages. However, this relationship has been called into question in recent years, and the Phillips curve may not accurately predict inflation in modern economies. Choices A and C do not accurately describe the Phillips curve.

The Idea Behind the Phillips Curve Is That ________