Which of the following is true?
A)Inflation and unemployment rates can both increase in the short run in response to positive supply shocks.
B)Inflation and unemployment rates can both decrease in the short run in response to reduced aggregate demand.
C)Inflation and unemployment rates can both decrease in the short run in response to positive supply shocks.
D)The short-run Phillips curve relationship appears to be relatively stable over time.

Question

Which of the following is true?​
A)​Inflation and unemployment rates can both increase in the short run in response to positive supply shocks.
B)​Inflation and unemployment rates can both decrease in the short run in response to reduced aggregate demand.
C)​Inflation and unemployment rates can both decrease in the short run in response to positive supply shocks.
D)​The short-run Phillips curve relationship appears to be relatively stable over time.

Quizplus · Accepted Answer

According to the Phillips Curve relationship, there is an inverse relationship between inflation and unemployment rates in the short run. However, this relationship can shift due to various factors. Positive supply shocks, such as improvements in technology or increases in productivity, can cause a decrease in inflation and unemployment rates in the short run. Therefore, option C is true. Option A is incorrect because positive supply shocks would lead to a decrease in unemployment rates and an increase in production, which may increase prices and inflation in the short run. Option B is incorrect because reducing aggregate demand would lead to a decrease in prices and inflation, but it may also cause a rise in unemployment rates in the short run. Option D is incorrect because the short-run Phillips curve may shift over time due to changes in the economy.

Which of the Following Is True?​

Which of the Following Is True?