The slope of the short-run Phillips curve is consistent with:
A)the long-run tradeoff between the unemployment rate and inflation.
B)the long-run tradeoff between inflation and GDP.
C)the short-run tradeoff between the money supply and interest rates.
D)the short-run tradeoff between business productivity and wage contracts.
E)the short-run tradeoff between the unemployment rate and inflation.

Question

Quizplus · Accepted Answer

The slope of the short-run Phillips curve represents the inverse relationship between the unemployment rate and inflation in the short run. As the unemployment rate decreases, inflation tends to increase, and vice versa. This tradeoff is observed in the short run only and does not hold in the long run, as the Phillips curve becomes vertical at the natural rate of unemployment. Therefore, choice E is the best answer as it correctly identifies the short-run tradeoff between the unemployment rate and inflation that is represented by the slope of the Phillips curve.

The Slope of the Short-Run Phillips Curve Is Consistent With