The Phillips curve:
A) holds that people's expectations of future inflation are based on their most recent experience.
B) is the combination of high unemployment rates and high inflation.
C) holds that people form expectations on the basis of all available information.
D) involves the strategic use of monetary policy to counteract macroeconomic expansions and contractions.
E) indicates a short-run inverse relationship between inflation and unemployment rates.

Question

Quizplus · Accepted Answer

The Phillips curve indicates a short-run inverse relationship between inflation and unemployment rates. Option A is true, but it only describes the basis of people's expectations, not the Phillips curve itself. Option B describes stagflation, which is outside the scope of the Phillips curve. Option C is true, but it is not specific to the Phillips curve. Option D refers to monetary policy, which is used to influence the Phillips curve, but it does not describe the curve itself.

The Phillips Curve