According to the Phillips curve presented in the text, a positive macroeconomic shock:
A) increases the rate of inflation.
B) decreases the rate of inflation.
C) has no effect on the rate of inflation.
D) has a negative effect on the unemployment rate.
E) has a positive effect on the unemployment rate.

Question

Quizplus · Accepted Answer

According to the Phillips curve, there is an inverse relationship between unemployment and inflation. This means that when unemployment is high, inflation is low and vice versa. Therefore, a positive macroeconomic shock, which typically leads to lower unemployment, will lead to higher inflation according to the Phillips curve.

According to the Phillips Curve Presented in the Text, a Positive