Question

Which of the following statements is true about the Phillips Curve?

A) There is no relationship between inflation and unemployment.

B) There is an inverse relationship between inflation and unemployment.

C) There is an indeterminate relationship between inflation and unemployment.

D) There is a positive relationship between inflation and unemployment.

Answer 1

The Phillips Curve shows an inverse relationship between inflation and unemployment.

Step-by-step explanation:

The Phillips Curve shows the tradeoff between unemployment and inflation in an economy.

From a Keynesian viewpoint, the Phillips Curve slopes down which means that there is an inverse relationship between inflation and unemployment.

Higher unemployment leads to lower inflation and vice versa.