Based on the Phillips curve, unexpected movements in inflation are related to ______, and based on the short-run aggregate supply curve, unexpected movements in the price level are related to ______.
A) sticky wages; sticky prices
B) sticky prices; sticky wages
C) output; unemployment
D) unemployment; output

Question

Quizplus · Accepted Answer

The Phillips curve suggests that unexpected movements in inflation are related to unemployment, as it posits an inverse relationship between the rate of inflation and the unemployment rate. Similarly, the short-run aggregate supply curve indicates that unexpected movements in the price level are related to output, as it shows the relationship between the price level and the quantity of goods and services that firms are willing to produce and sell.

Based on the Phillips Curve, Unexpected Movements in Inflation Are