The Phillips curve relationship exists primarily when the economy ________.
A) has high unemployment
B) experiences a financial crisis
C) approaches full employment
D) is in a recession

Question

Quizplus · Accepted Answer

The Phillips curve shows an inverse relationship between inflation and unemployment. When unemployment is high, there tends to be lower inflation and vice versa. However, this relationship is most prominent when the economy is approaching full employment, as it is at that point that resources become scarce and inflationary pressures start to build. Therefore, the best choice is C - approaches full employment.

The Phillips Curve Relationship Exists Primarily When the Economy ________