Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?
A)The demand for labor is large when the rate of inflation is small.
B)When the rate of unemployment is high, the rate of inflation is high.
C)The rate of inflation and the rate of unemployment are inversely related.
D)The rate of inflation and the rate of unemployment are directly related.

Question

Refer to the above diagram for a specific economy.Which of the following best describes the relationship shown by this curve?
A)The demand for labor is large when the rate of inflation is small. 
B)When the rate of unemployment is high, the rate of inflation is high. 
C)The rate of inflation and the rate of unemployment are inversely related. 
D)The rate of inflation and the rate of unemployment are directly related.

Quizplus · Accepted Answer

The curve represents the Phillips Curve, which illustrates the inverse relationship between the rate of inflation and the rate of unemployment in an economy. As the rate of unemployment decreases, the demand for labor increases, leading to higher wages and ultimately inflation. Conversely, when the rate of unemployment is high, there is less competition for jobs, leading to lower wages and lower inflation. Therefore, the rate of inflation and the rate of unemployment are inversely related.

Refer to the Above Diagram for a Specific Economy