Taken together, the Phillips curve and Okun's law imply there is a ________ relationship between ________ and unemployment.
A) positive; inflation
B) negative; inflation
C) negative; interest rates
D) positive; interest rates
E) Not enough information is given.

Question

Quizplus · Accepted Answer

The Phillips curve shows a negative relationship between inflation and unemployment, while Okun's law shows a negative relationship between GDP growth and unemployment. As inflation and GDP growth are positively correlated, this means there is a negative relationship between inflation (or GDP growth) and unemployment, as shown by the Phillips curve and Okun's law. Therefore, the correct choice is B, negative relationship between inflation and unemployment.

Taken Together, the Phillips Curve and Okun's Law Imply There