In which situation will the economy move to a point on the Phillips curve where unemployment is higher?
A) if the inflation rate increases
B) if the government increases its expenditures
C) if the Bank of Canada decreases the money supply
D) if expected inflation increases

Question

Quizplus · Accepted Answer

The Phillips curve illustrates the inverse relationship between inflation and unemployment. When the Bank of Canada decreases the money supply, it typically leads to lower inflation and higher interest rates, which can reduce investment and spending, leading to higher unemployment. This moves the economy to a point on the Phillips curve with higher unemployment.

In Which Situation Will the Economy Move to a Point