The short-run Phillips curve shows a relationship between the
A) inflation rate and the interest rate.
B) inflation rate and real GDP.
C) unemployment rate and the interest rate.
D) inflation rate and the unemployment rate.
E) price level and real GDP.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the inverse relationship between the inflation rate and the unemployment rate. As unemployment decreases, firms need to offer higher wages to attract workers, leading to higher overall prices and inflation. Thus, there is a trade-off between inflation and unemployment in the short run.

The Short-Run Phillips Curve Shows a Relationship Between the