Suppose the unemployment rate goes down.According to the short-run Phillips curve, what will happen to the inflation rate?
A) The inflation rate will go up.
B) The inflation rate will go down.
C) The inflation rate will NOT change.
D) The inflation rate will become a deflation rate.

Question

Suppose the unemployment rate goes down.According to the short-run Phillips curve, what will happen to the inflation rate?  
A) The inflation rate will go up. 
B) The inflation rate will go down. 
C) The inflation rate will NOT change. 
D) The inflation rate will become a deflation rate.

Quizplus · Accepted Answer

According to the short-run Phillips curve, there is an inverse relationship between unemployment and inflation. Therefore, if the unemployment rate goes down, the inflation rate will go up.

Suppose the Unemployment Rate Goes Down