What does the idea of a trade-off between inflation and unemployment mean?
A) That lower inflation could be established but only at the cost of higher unemployment
B) That lower unemployment could be achieved but only at the cost of more government spending
C) That lower inflation could be established but only at the cost of lower unemployment
D) That lower unemployment could be achieved but only at the cost of lower inflation rates

Question

Quizplus · Accepted Answer

The trade-off between inflation and unemployment is known as the Phillips Curve, which suggests that there is an inverse relationship between the two variables. This means that as inflation decreases, unemployment tends to increase (and vice versa). Therefore, the best choice is A, as it correctly represents the idea that lower inflation comes at the cost of higher unemployment. Choices B, C, and D are incorrect as they do not accurately reflect the trade-off between inflation and unemployment.

What Does the Idea of a Trade-Off Between Inflation and Unemployment