Figure 36-1.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,U represents the unemployment rate.
-Refer to Figure 36-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations
A)that applies both in the short run and in the long run.
B)that is relevant to choices involving fiscal policy,but not to choices involving monetary policy.
C)of inflation and unemployment.
D)All of the above are correct.

Question

Figure 36-1.The left-hand graph shows a short-run aggregate-supply (SRAS)curve and two aggregate-demand (AD)curves.On the right-hand diagram,U represents the unemployment rate.  
-Refer to Figure 36-1.The curve that is depicted on the right-hand graph offers policymakers a "menu" of combinations
A)that applies both in the short run and in the long run. 
B)that is relevant to choices involving fiscal policy,but not to choices involving monetary policy. 
C)of inflation and unemployment. 
D)All of the above are correct.

Quizplus · Accepted Answer

The right-hand graph depicts combinations of inflation and unemployment. This curve is called the Phillips Curve and it shows that there is a trade-off between inflation and unemployment in the short run. Policymakers can choose a combination on this curve depending on their objectives.