There is a trade-off between unemployment and inflation when the aggregate
A)Supply curve is upward-sloping.
B)Supply curve is downward-sloping.
C)Supply curve is vertical.
D)Demand curve is downward-sloping.

Question

Quizplus · Accepted Answer

When the aggregate supply curve is upward-sloping, there is a trade-off between unemployment and inflation because as unemployment decreases (and more people find jobs), there is increased demand for goods and services, leading to higher prices (inflation). Conversely, when unemployment increases, demand for goods and services decreases, leading to lower prices (deflation). This trade-off is known as the Phillips curve.

There Is a Trade-Off Between Unemployment and Inflation When the Aggregate