The Phillips curve shows the relationship between
A) the rate of growth in real GDP and the unemployment rate.
B) the inflation rate and the unemployment rate.
C) aggregate demand and the unemployment rate.
D) aggregate supply and the unemployment rate.

Question

Quizplus · Accepted Answer

The Phillips curve shows the inverse relationship between inflation and unemployment rate. When unemployment is high, there is less competition for jobs and therefore wages stay low. But when unemployment is low, employers have to increase wages to attract workers, which leads to an increase in demand for goods and services and therefore inflation. This relationship is often referred to as the "the trade-off between inflation and unemployment".

The Phillips Curve Shows the Relationship Between