If the short-run Phillips curve were stable, what would be unusual?
A) an increase in inflation and an increase in output
B) a decrease in inflation and an increase in unemployment
C) an increase in both inflation and unemployment
D) an increase in output and a decrease in unemployment

Question

Quizplus · Accepted Answer

If the short-run Phillips curve were stable, it would mean that there is a consistent trade-off between inflation and unemployment in the short run. Therefore, an increase in both inflation and unemployment would be unusual as it would suggest that the Phillips curve is no longer stable. Option A could happen if the short-run Phillips curve is upward-sloping, option B could happen if the short-run Phillips curve shifts to the left, and option D could happen if the short-run Phillips curve is downward-sloping.

If the Short-Run Phillips Curve Were Stable, What Would Be