The tradeoff for monetary policy represented by the Phillips curve is
A)lower inflation for lower output.
B)lower inflation for higher unemployment.
C)lower inflation for higher employment.
D)higher expected inflation for higher output.
E)none of the above.

Question

Quizplus · Accepted Answer

The Phillips curve suggests a tradeoff between inflation and unemployment, not output. As unemployment decreases, inflation increases and vice versa. Therefore, the best choice is B: lower inflation for higher unemployment.

The Tradeoff for Monetary Policy Represented by the Phillips Curve