The short-run Phillips curve suggests what policy making implications?
A) Active policy making does not yield any predictable results.
B) Passive policy making is more effective than active policy making.
C) Using discretionary policies, it may be possible to achieve just the right unemployment and inflation mix.
D) Maintaining both the inflation and unemployment rates at low levels is possible if policy makers will rely solely on nondiscretionary policy making.

Question

Quizplus · Accepted Answer

The short-run Phillips curve indicates that there is a negative relationship between unemployment and inflation in the short-run. Using discretionary policies, policymakers can manipulate the inflation-unemployment tradeoff and achieve a desirable mix of both variables. Therefore, choice C suggests that using discretionary policies, it may be possible to achieve just the right unemployment and inflation mix.

The Short-Run Phillips Curve Suggests What Policy Making Implications