A country with a steep Phillips curve experiences a smaller increase in the rate of inflation than a country with a relatively flat Phillips curve, assuming the size of the positive demand shock in each country is the same.

Question

Quizplus · Accepted Answer

A steep Phillips curve indicates a strong inverse relationship between unemployment and inflation, suggesting that a given demand shock leads to a smaller increase in inflation and a larger decrease in unemployment compared to a flat Phillips curve, where the same demand shock would result in a larger increase in inflation and a smaller decrease in unemployment.

A Country with a Steep Phillips Curve Experiences a Smaller