Consider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that:the Phillips curve would shift downwardswages would fallthe natural rate of unemployment would fallthe inflation rate would increase

The inverse link between unemployment and inflation in the short term is shown graphically by the…

Answered: Consider the short-run Phillips curve.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that:

the Phillips curve would shift downwards
wages would fall
the natural rate of unemployment would fall
the inflation rate would increase

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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