According to the short-run Phillips curve,if the central bank increases the money supply,then
A)inflation and unemployment will both fall.
B)inflation and unemployment will both rise.
C)inflation will fall and unemployment will rise.
D)inflation will rise and unemployment will fall.

Question

Quizplus · Accepted Answer

According to the short-run Phillips curve, there is a trade-off between inflation and unemployment. When the central bank increases the money supply, it stimulates economic activity and reduces unemployment in the short-run. However, this also leads to an increase in demand for goods and services, which causes prices to rise and leads to inflation. Therefore, the correct choice is that inflation will rise and unemployment will fall.

According to the Short-Run Phillips Curve,if the Central Bank Increases