The short-run Phillips curve portrays a(n):
A)direct relationship between total employment and the inflation rate.
B)inverse relationship between inflation and total employment.
C)direct relationship between the unemployment rate and the inflation rate.
D)inverse relationship between the unemployment rate and the inflation rate.
E)inverse relationship between the price level and the unemployment rate.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the inverse relationship between the unemployment rate and inflation rate. As unemployment falls, demand for labor increases, and workers gain bargaining power to negotiate higher wages, causing firms to increase their prices, leading to higher inflation rates. As unemployment rises, however, firms face less pressure to raise wages, enabling them to keep their prices stable, contributing to lower inflation rates.

The Short-Run Phillips Curve Portrays A(n)