The relationship between short-run aggregate supply curves and Phillips curves is that there:
A) is no relationship between short-run aggregate supply curves and Phillips curves.
B) are several short-run aggregate supply curves for each Phillips curve.
C) are several Phillips curves for each short-run aggregate supply curve.
D) is exactly one Phillips curve corresponding to each short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

The short-run aggregate supply curve shows the relationship between the price level and the quantity of output supplied in the short run. The Phillips curve shows the relationship between the rate of inflation and the rate of unemployment. In the short run, there is a trade-off between inflation and unemployment. An increase in the price level will lead to an increase in the quantity of output supplied, but it will also lead to an increase in the rate of inflation. Conversely, a decrease in the price level will lead to a decrease in the quantity of output supplied, but it will also lead to a decrease in the rate of inflation.

The Relationship Between Short-Run Aggregate Supply Curves and Phillips Curves