The Negative Correlation Between Inflation and Unemployment Is Observed Because

question 82

Multiple Choice

The negative correlation between inflation and unemployment is observed because

• A)a rightward shift of the AD curve will raise unemployment in the long run and decrease inflation in the short run.
• B)a rightward shift of the AD curve will raise unemployment in the short run and decrease inflation in the long run.
• C)a rightward shift of the AD curve will reduce unemployment in the long run and increase inflation in the short run.
• D)a rightward shift of the AD curve will reduce unemployment in the short run and increase inflation in the long run.
• E)a leftward shift the AD curve will increase potential GDP and reduce inflation in the short run.

---

Definitions:

Monopoly Power

The ability of a single supplier to control the market price and exclude competitors.

Elasticity of Demand

An assessment of the degree to which the quantity of a good demanded changes in response to its price movement.

Marginal Cost

The additional expenditure involved in making one more unit of a product or service.

Retail Price

The total cost at which a product or service is sold to the end consumer, including any markups by retailers.