The short-run Phillips curve shows the combinations of
A)unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.
B)unemployment and inflation that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
C)real GDP and the price level that arise in the short run as short-run aggregate supply shifts the economy along the aggregate demand curve.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the relationship between the unemployment rate and the inflation rate in the short run, as shifts in aggregate demand cause movements along the short-run aggregate supply curve. As prices increase, firms may hire more workers to produce the higher level of output, leading to lower unemployment in the short run. Therefore, the correct statement is that the short-run Phillips curve shows the combinations of unemployment and inflation that arise in the short run as aggregate demand shifts the economy along the short-run aggregate supply curve.

The Short-Run Phillips Curve Shows the Combinations of