A Phillips curve shows
A)the relationship between the rate of interest and planned investment.
B)the relationship between the money supply and the price level.
C)that an increase in government spending will decrease real national income.
D)that an increase in inflation may be associated with a decrease in the rate of unemployment.

Question

Quizplus · Accepted Answer

The Phillips curve shows the relationship between the rate of unemployment and the rate of inflation. Specifically, it suggests that as unemployment decreases, inflation increases and vice versa. This means that an increase in inflation may be associated with a decrease in the rate of unemployment, as shown by the Phillips curve. Choices A, B, and C are incorrect because they do not accurately describe what the Phillips curve shows.

A Phillips Curve Shows