The short-run Phillips curve is downward sloping because
A)the expected inflation rate is zero in the short run.
B)reducing the unemployment rate will reduce the inflation rate in the short run.
C)the unemployment rate can be above or below the natural unemployment rate.
D)in the long run, the expected inflation rate equals the actual inflation rate.
E)the economy always returns to full employment.

Question

Quizplus · Accepted Answer

The short-run Phillips curve is downward sloping because it shows an inverse relationship between inflation and unemployment, meaning that as unemployment decreases, inflation tends to increase, and vice versa. This relationship can occur when the unemployment rate is above or below the natural rate.

The Short-Run Phillips Curve Is Downward Sloping Because