Along a short-run Phillips curve, ?
Correct answer: A. a higher rate of inflation is associated with a lower unemployment rate
- A. a higher rate of inflation is associated with a lower unemployment rate
- B. a higher rate of growth in output is associated with a lower unemployment rate
- C. a higher rate of inflation is associated with a higher unemployment rate
- D. a higher rate of growth in output is associated with a higher unemployment rate.
Explanation
Along a short-run Phillips curve, stronger demand tends to raise inflation and employment, so the unemployment rate falls. Thus higher inflation is associated with lower unemployment in the short run.
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