The negative correlation between inflation and unemployment is observed because
A)a rightward shift of the AD curve will raise unemployment in the long run and decrease inflation in the short run.
B)a rightward shift of the AD curve will raise unemployment in the short run and decrease inflation in the long run.
C)a rightward shift of the AD curve will reduce unemployment in the long run and increase inflation in the short run.
D)a rightward shift of the AD curve will reduce unemployment in the short run and increase inflation in the long run.
E)a leftward shift the AD curve will increase potential GDP and reduce inflation in the short run.

Question

Quizplus · Accepted Answer

A rightward shift of the AD curve typically reduces unemployment in the short run due to increased demand, leading to higher production and employment, while it can increase inflation in the long run as the economy overheats.

The Negative Correlation Between Inflation and Unemployment Is Observed Because