The short- run Phillips curve shows the relationship between unemployment and inflation when the natural unemployment rate is constant and
A) the expected inflation rate does not change.
B) the expected inflation rate is rising.
C) the expected inflation rate is falling.
D) aggregate demand is changing.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the relationship between unemployment and inflation in the short run when the natural unemployment rate is constant and the expected inflation rate does not change. Changes in aggregate demand can shift the curve, but the curve itself reflects the relationship between unemployment and inflation for a given expected inflation rate. Therefore, choices B, C, and D are not correct.

The Short- Run Phillips Curve Shows the Relationship Between Unemployment