The short-run relationship between inflation and unemployment is often called
A)the Classical Dichotomy.
B)Money Neutrality.
C)the Phillips curve.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The Phillips curve shows the inverse relationship between inflation and unemployment in the short-run. As unemployment decreases, the demand for labor increases, which leads to higher wages and ultimately higher prices. This relationship was first observed by economist A.W. Phillips in the 1950s and has since been widely studied and debated in macroeconomics. Choices A and B refer to other concepts that are not directly related to the short-run relationship between inflation and unemployment.

The Short-Run Relationship Between Inflation and Unemployment Is Often Called