Consider the U.S. data for inflation and the unemployment rate for the last five decades. Which of the following statements describes the relationship between the two variables?
A) There is a positive relationship.
B) The natural unemployment rate did not change but the expected inflation rate did change over these years.
C) Several different short-run Phillips curves representing different natural unemployment rates and different expected inflation rates existed.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The Phillips curve relationship between inflation and unemployment has shifted over time, indicating that there is not a fixed relationship between the two variables. Different short-run Phillips curves have existed, depending on the natural unemployment rate and expected inflation rate of the time period. This suggests that the relationship between inflation and unemployment is complex and affected by various factors.