Refer to the following figure when answering the following questions.
Figure 9.5: U.S. Inflation 1960-2015 (Source: Bureau of Labor Statistics)
-Consider Figure 9.5, which shows the annual inflation rate. According to the Phillips curve, the period from about 2003 to 2005 was a period of:
A) a slumping economy.
B) a booming economy.
C) stagnation.
D) None of these answers is correct.
E) Not enough information is given.

Question

Refer to the following figure when answering the following questions.
Figure 9.5: U.S. Inflation 1960-2015  (Source: Bureau of Labor Statistics)
-Consider Figure 9.5, which shows the annual inflation rate. According to the Phillips curve, the period from about 2003 to 2005 was a period of:
A) a slumping economy. 
B) a booming economy. 
C) stagnation. 
D) None of these answers is correct. 
E) Not enough information is given.

Quizplus · Accepted Answer

According to the Phillips curve, there is an inverse relationship between inflation and unemployment, meaning when inflation is low, unemployment will be high, and when inflation is high, unemployment will be low. Therefore, when there is a low inflation rate, it is likely that the economy is in a slumping state, and when there is a high inflation rate, it is likely that the economy is booming. From Figure 9.5, we can see that the period from 2003 to 2005 had a relatively high inflation rate, indicating a booming economy.

Refer to the Following Figure When Answering the Following Questions