The Phillips curve shows that ?
Correct answer: D. a decrease in inflation temporarily increases unemployment.
- A. the business cycle has been eliminated
- B. an increase in inflation temporarily increases unemployment.
- C. inflation and unemployment are unrelated in the short run.
- D. a decrease in inflation temporarily increases unemployment.
- E. none of these
Explanation
The short-run Phillips curve describes an inverse relationship between inflation and unemployment: reducing inflation can temporarily raise unemployment as the economy adjusts. Thus option d states the relevant short-run trade-off.
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