For a given level of anticipated inflation and natural unemployment rate, the short -run Phillips curve shows the relationship between
A) potential GDP and real GDP.
B) inflation and money growth.
C) real GDP growth and the unemployment rate.
D) inflation and the unemployment rate.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the relationship between inflation and the unemployment rate. It suggests that as unemployment decreases, inflation increases and vice versa, holding other factors constant. Therefore, the short-run Phillips curve is a key tool in analyzing the trade-off between inflation and unemployment in the short run.

For a Given Level of Anticipated Inflation and Natural Unemployment