The short-run Phillips curve shows the tradeoff between , holding the expected inflation rate and the natural unemployment rate constant.
A) inflation and unemployment
B) the price level and unemployment
C) the price level and real GDP
D) inflation and employment

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the tradeoff between inflation and unemployment while holding the expected inflation rate and the natural unemployment rate constant. A decrease in unemployment leads to an increase in inflation and vice versa. Therefore, the relationship between inflation and employment is the focus of the short-run Phillips curve.

The Short-Run Phillips Curve Shows the Tradeoff Between , Holding