The Phillips Curve suggests that a government trying to reduce inflation must accept
A) foreign aid.
B) stagflation.
C) increased costs.
D) supply shocks.
E) higher unemployment.

Question

Quizplus · Accepted Answer

The Phillips Curve suggests that there is an inverse relationship between unemployment and inflation. Therefore, in order to reduce inflation, the government must increase unemployment. This means that the government must accept higher levels of unemployment as a trade-off for reducing inflation.

The Phillips Curve Suggests That a Government Trying to Reduce