According to the Phillips curve, the inflation rate depends on all of the following except:
A) previously expected inflation.
B) an exogenous supply shock.
C) the real interest rate.
D) the deviation of output from its natural rate.

Question

Quizplus · Accepted Answer

The Phillips curve describes the relationship between inflation and unemployment (or the deviation of output from its natural rate), not the real interest rate. It suggests that inflation is influenced by previously expected inflation, exogenous supply shocks, and the gap between actual and potential output, but not directly by the real interest rate.

According to the Phillips Curve, the Inflation Rate Depends on All