The short-run Phillips curve relationship implies that the inflation rate
A) is higher when the actual unemployment rate is also higher.
B) is higher when the actual unemployment rate is lower.
C) is higher when the natural unemployment rate is also higher.
D) is constant regardless of the actual unemployment rate.

Question

Quizplus · Accepted Answer

The short-run Phillips curve suggests an inverse relationship between inflation and unemployment, meaning that when the actual unemployment rate is lower, the inflation rate is higher. This is because lower unemployment typically indicates higher demand for goods and services, pushing prices up.

The Short-Run Phillips Curve Relationship Implies That the Inflation Rate