Question

There is a trade-off between unemployment and inflation when the aggregate_____________.a. Supply curve is upward sloping.b. Supply curve is downward sloping.c. Supply curve is vertical.d. Demand curve is downward sloping.

Answer 1

Answer:

D. Demand curve is downward sloping.

The Phillips curve shows the inverse trade-off between rates of inflation and rates of unemployment. As aggregate demand increases, unemployment decreases as more workers are hired, real GDP output increases, and the price level increases; this situation describes a demand-pull inflation scenario.