The Early Phillips Curve Showed a Trade-Off Between Unemployment and Inflation

question 52

True/False

The early Phillips curve showed a trade-off between unemployment and inflation because it was drawn for a period in which the main source of instability was aggregate demand.

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Definitions:

Desired Expenditures

The amount of spending households, firms, and the government wish to make, usually influenced by economic conditions and policies.

Inflation

A persistent upsurge in the average cost of goods and services across an economy over time.

Unemployment

The situation when people who are willing to work at current wage rates cannot find jobs.

Aggregate Demand

Aggregate demand represents the total quantity of all goods and services demanded by the economy at various price levels, in a given period of time.