According to the short-run Phillips curve,inflation
A)and unemployment would fall if the policymakers decreased the money supply.
B)would fall and unemployment would rise if policymakers decreased the money supply.
C)and unemployment would fall if the policymakers increased the money supply.
D)would fall and unemployment would rise if policymakers increased the money supply.

Question

Quizplus · Accepted Answer

According to the short-run Phillips curve, there is an inverse relationship between inflation and unemployment. If policymakers decrease the money supply, it would lead to a decrease in aggregate demand and a decrease in inflation. However, the decrease in aggregate demand would also lead to a decrease in output and an increase in unemployment. Therefore, inflation would fall and unemployment would rise if policymakers decreased the money supply.

According to the Short-Run Phillips Curve,inflation