The theory behind the short-run Phillips curve relationship is that
A) people's expectations of future inflation are based on their most recent experiences.
B) people form expectations on the basis of all available information.
C) monetary policy has no real effects in the long run.
D) monetary expansion stimulates the economy,and this outcome reduces the unemployment rate.
E) prices are flexible in the long run,causing no relationship between unemployment and inflation.

Question

Quizplus · Accepted Answer

The short-run Phillips curve suggests that there is a trade-off between inflation and unemployment, where monetary expansion can stimulate the economy and reduce unemployment in the short run.

The Theory Behind the Short-Run Phillips Curve Relationship Is That