The economy will move to a point on the short-run Phillips curve where unemployment is higher if
A)the inflation rate decreases.
B)the government increases its expenditures.
C)the Fed increases the money supply.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

According to the short-run Phillips curve, there is an inverse relationship between unemployment and inflation. This means that if the inflation rate decreases, the economy will move to a point on the curve where unemployment is higher. This is because lower inflation often requires lower aggregate demand, which means that businesses need fewer workers to meet the lower demand.

The Economy Will Move to a Point on the Short-Run