Question

23. According to the Phillips curve, short-term changes in inflation are due to changes in: a. interest rates

    b. unemployment
    c. short-termoutputfluctuations d. long-term inflation
    e. long-term output

Answer 1

The Philips curve shows that there is an inverse relationship between the Inflation and Unemployed. With the economic growth, inflation occurs leading to more job creation and less Unemployment. But this concept hold in short run as in long run , unemployment level remains more or less same regardless of the Price level.

This,the Correct Option is B. Unemployment

All the other options are Incorrect because According to the Expected augmented Phillips curve , Change in inflation rate is determined by change in unemployment rate and the magnitude is determined by the alpha

The other options given don't includes Unemployment, thus,they are incorrect.