This is the only option that states a negative correlation between two economic variables. Specifically, it suggests that as the rate of change in nominal wages decreases, the unemployment rate increases. This relationship is often referred to as the Phillips Curve. The other answer choices either suggest a positive correlation or do not provide a clear relationship between the variables mentioned.

Solved

There Is a

Question 4

Multiple Choice

There is a

A) negative correlation between the rate of change in nominal wages and the rate of change in other money prices.
B) positive correlation between the unemployment rate and the deviation of aggregate economic activity from trend.
C) negative correlation between the unemployment rate and the deviation of aggregate economic activity from trend.
D) negative correlation between aggregate economic activity and the inflation rate.
E) negative correlation between the rate of change in nominal wages and the unemployment rate.

Correct Answer: