The view of the Phillips curve that prevailed in the 1960s implied that policies that ?
Correct answer: B. lower unemployment rate will tend to raise the inflation rate
- A. lower unemployment rate will tend to lower the inflation rate
- B. lower unemployment rate will tend to raise the inflation rate
- C. raise inflation rate will tend to raise the unemployment rate
- D. lower inflation rate will tend to raise the unemployment rate
Explanation
The original short-run Phillips curve was interpreted as an inverse relationship: expansionary policies could reduce unemployment but would increase inflation. Thus, lowering unemployment was expected to raise the inflation rate.
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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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