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    Question

    The Phillips curve shows relation between __________

    A Inflation and GDP Correct Answer Incorrect Answer
    B GDP and investment Correct Answer Incorrect Answer
    C Inflation and investment Correct Answer Incorrect Answer
    D Inflation and unemployment Correct Answer Incorrect Answer
    E GDP and unemployment Correct Answer Incorrect Answer

    Solution

    TheĀ  Phillips curve Ā is an economic concept developed by A. W.Ā  Phillips Ā stating that inflation and unemployment have a stable and inverse relationship . The short-run Phillips curveĀ is roughly L-shaped to reflect the initial inverse relationship between the two variables. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. TheĀ long-run Phillips curveĀ is a vertical line that illustrates that there is no permanent trade-off between inflation and unemployment in theĀ long run.Ā The long-run Phillips curveĀ is vertical at the natural rate of unemployment.

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