What can be concluded from the chart below which shows inflation versus unemployment rates from 1948 to 2015)?
A) In the long run, the Phillips Curve is a robust model.
B) In the short run, unemployment is correlated with inflation.
C) In the long run, unemployment is correlated with inflation.
D) In the short run, unemployment is not always correlated with inflation.
E) In the long run, unemployment is not always correlated with inflation.

Question

What can be concluded from the chart below which shows inflation versus unemployment rates from 1948 to 2015)? 
A) In the long run, the Phillips Curve is a robust model. 
B) In the short run, unemployment is correlated with inflation. 
C) In the long run, unemployment is correlated with inflation. 
D) In the short run, unemployment is not always correlated with inflation. 
E) In the long run, unemployment is not always correlated with inflation.

Quizplus · Accepted Answer

The chart shows that in the short run, there is a negative correlation between unemployment and inflation (when one goes up, the other goes down) but this relationship is not always true in the long run. There are instances where both unemployment and inflation have increased at the same time. This suggests that there are many other factors besides unemployment that affect inflation in the long run. Therefore, we cannot conclude that the Phillips Curve is a robust model in the long run.

What Can Be Concluded from the Chart Below Which Shows