The Inverse Relationship Between the Inflation Rate and the Unemployment

question 35

Multiple Choice

The inverse relationship between the inflation rate and the unemployment rate is a result of the assumption that

• A) all inflation is demand-side inflation.
• B) as the unemployment rate falls, demand for products and resources decreases.
• C) as the unemployment rate rises, bottlenecks occur throughout the economy.
• D) there is a significant amount of excess capacity at low unemployment rates.
• E) as prices rise, unemployment also rises.

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Definitions:

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