Refer to the following figure when answering
Figure 9.4: U.S. Inflation 1990-2012
(Source: Bureau of Labor Statistics)
-Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, ________ would increase less in ________.
A) the change in inflation; Economy 2
B) the change in unemployment; Economy 1
C) the change in unemployment; Economy 2
D) the change in interest rates; Economy 1
E) Not enough information is given.

Question

Refer to the following figure when answering  
Figure 9.4: U.S. Inflation 1990-2012 
 (Source: Bureau of Labor Statistics)
-Consider two economies. Economy 1 has a steep Phillips curve and Economy 2 has a gently sloped Phillips curve. If each economy experiences an identical economic expansion, ________ would increase less in ________.
A) the change in inflation; Economy 2 
B) the change in unemployment; Economy 1 
C) the change in unemployment; Economy 2 
D) the change in interest rates; Economy 1 
E) Not enough information is given.

Quizplus · Accepted Answer

A gently sloped Phillips curve indicates that there is a smaller trade-off between inflation and unemployment. Therefore, Economy 2 would experience a smaller increase in unemployment for the same increase in inflation.

Refer to the Following Figure When Answering