In the Phillips curve
,
Is:
A)a temporary demand shock.
B)a permanent price change.
C)a temporary price shock.
D)a temporary unemployment shock.
E)a structural macroeconomic change.

Question

In the Phillips curve 
, 
Is:
A)a temporary demand shock. 
B)a permanent price change. 
C)a temporary price shock. 
D)a temporary unemployment shock. 
E)a structural macroeconomic change.

Quizplus · Accepted Answer

The Phillips curve shows the inverse relationship between unemployment and inflation. A temporary increase in prices due to a shock (such as a sudden increase in oil prices) would lead to a movement along the Phillips curve, resulting in higher inflation but no change in the natural rate of unemployment. Thus, a temporary price shock is the best choice.

In the Phillips Curve