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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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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