According to the Phillips Curve, a Rise in Inflation Would

question 55

Multiple Choice

According to the Phillips curve, a rise in inflation would correspond to _____ while a rise in unemployment would correspond to _____.

• A) an increase in unemployment; an increase in inflation
• B) a decrease in unemployment; an increase in inflation
• C) an increase in unemployment; a decrease in inflation
• D) a decrease in unemployment; a decrease in inflation

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Definitions:

Natural Rate

often references the natural rate of unemployment, which is the level of unemployment consistent with sustaining a stable rate of inflation.

Short-run Phillips Curve

A curve depicting the inverse relationship between the rate of inflation and the unemployment rate in the short term, suggesting a trade-off between the two.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment, used as a key indicator of the health of an economy.

Inflation Rate

The rate at which the general level of prices for goods and services is rising, eroding the purchasing power of currency.