Question

The Phillips curve shows that: a- Inflation is usually higher than expected when actual equilibrium GDP...

The Phillips curve shows that:

a- Inflation is usually higher than expected when actual equilibrium GDP is greater than potential GDP

b- Changes in labor demand tend to be deflationary

c- As unemployment rises, the general price level is rising

d- Technological improvements might increase the level of noncyclical unemployment

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Answer #1

The Philips curve can be defined as the curve which shows the inverse relationship between unemployment rate and inflation rate.

Hence it can be said the short-run trade-off between the rate of inflation and the unemployment rate is best represented by the Philips curve.

Hence it can be said that the Phillips curve shows that as unemployment rises, the general price level is rising. It means unemployment rate and inflation rate is inversely related.

Hence option c is the correct answer.

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