For a given level of anticipated inflation and natural unemployment rate, the short- run Phillips curve shows the relationship between
A) inflation and the unemployment rate.
B) real GDP growth and the unemployment rate.
C) potential GDP and real GDP.
D) inflation and money growth.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows the inverse relationship between inflation and unemployment. As unemployment falls below its natural rate, inflation tends to rise and vice versa. This relationship is depicted by the downward-sloping curve. Real GDP growth, potential GDP, and money growth are not directly related to the short-run Phillips curve.

For a Given Level of Anticipated Inflation and Natural Unemployment