A Phillips curve shows the relationship between the
A) unemployment rate and real GDP.
B) inflation rate and real GDP.
C) inflation rate and the unemployment rate.
D) price level and real GDP.

Question

Quizplus · Accepted Answer

The Phillips curve shows the inverse relationship between the inflation rate and the unemployment rate. As unemployment decreases, the labor market tightens, putting upward pressure on wages and prices, which leads to higher inflation. Conversely, higher levels of unemployment result in lower inflation. The curve is named after economist A.W. Phillips, who first discovered the relationship between unemployment and inflation in the 1950s.

A Phillips Curve Shows the Relationship Between the