Assume weak growth in aggregate demand keeps the economy below potential GDP,so unemployment rises but inflation falls.This explains the ________ slope of the short-run Phillips curve.

Question

Quizplus · Accepted Answer

A negative slope of the short-run Phillips curve means that there is an inverse relationship between unemployment and inflation. In this case, weak growth in aggregate demand leads to an increase in unemployment and a decrease in inflation. This is consistent with a negative slope of the Phillips curve.

Assume Weak Growth in Aggregate Demand Keeps the Economy Below