The Phillips curve shows the trade-off between _____ and _____?
Correct answer: B. the inflation rate, the unemployment rate
- A. the inflation rate, interest rates
- B. the inflation rate, the unemployment rate
- C. interest rates, output
- D. output, employment
Explanation
The Phillips curve describes an inverse short-run relationship between inflation and unemployment: lower unemployment is generally associated with higher inflationary pressure. Interest rates and output are not the two variables directly shown by the standard curve.
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About Macroeconomics
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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