According to the Phillips curve,policymakers would reduce inflation but raise unemployment if they
A)decreased the money supply.
B)increased government expenditures.
C)decreased taxes.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

According to the Phillips curve, there is an inverse relationship between inflation and unemployment, meaning that when inflation is high, unemployment tends to be low and vice versa. If policymakers want to reduce inflation, they need to take contractionary monetary policy measures, such as decreasing the money supply. However, this could also lead to an increase in unemployment as firms may reduce their investment and hiring, resulting in a decrease in demand for labor. Therefore, reducing inflation would lead to increased unemployment. Hence, Choice A is correct.  Increasing government expenditures or decreasing taxes would lead to an increase in aggregate demand and would shift the aggregate demand curve to the right, which could lead to an increase in both inflation and employment. Therefore, Choice B and Choice C are not correct.

According to the Phillips Curve,policymakers Would Reduce Inflation but Raise