If the short-run aggregate supply curve is steep, the Phillips curve will be:
A) flat.
B) steep.
C) backward-bending.
D) unrelated to the slope of the short-run aggregate supply curve.

Question

Quizplus · Accepted Answer

The slope of the Phillips curve is determined by the responsiveness of nominal wages to changes in unemployment. If the short-run aggregate supply curve is steep, it indicates that changes in the price level have a significant impact on the quantity of output supplied in the short run. In this case, firms will be more willing to adjust wages downwards as unemployment rises to maintain profitability, leading to a steeper Phillips curve.

If the Short-Run Aggregate Supply Curve Is Steep, the Phillips