Asked by Julian Cintron on Jul 08, 2024
Verified
The short-run Phillips curve shows that:
A) the economy can have low inflation and low unemployment simultaneously.
B) the economy can have high per-capita income and high interest rate simultaneously.
C) a reduction in per-capita income comes at the expense of lower inflation.
D) a reduction in unemployment comes at the expense of higher inflation.
E) a reduction in inflation comes at the expense of lower exchange rate.
Short-run Phillips Curve
A graphical representation showing the inverse relationship between unemployment rates and inflation rates in the short-term.
Per-capita Income
The average income earned per person in a certain area, calculated by dividing the area's total income by its total population.
- Familiarize yourself with the basis of the short-run Phillips curve and its ramifications for inflation and unemployment figures.
Verified Answer
PW
PIYUMI WIJEWARDHANAJul 10, 2024
Final Answer :
D
Explanation :
The short-run Phillips curve shows an inverse relationship between unemployment and inflation. Therefore, a reduction in unemployment can only be achieved at the expense of higher inflation, as shown by movement along the curve. However, in the long run, the Phillips curve is vertical, indicating that there is no trade-off between inflation and unemployment.
Learning Objectives
- Familiarize yourself with the basis of the short-run Phillips curve and its ramifications for inflation and unemployment figures.