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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

    The  Phillips curve  is an economic concept developed by A. W.  Phillips  stating that inflation and unemployment have a stable and inverse relationship . The short-run Phillips curve 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. The long-run Phillips curve is a vertical line that illustrates that there is no permanent trade-off between inflation and unemployment in the long run. The long-run Phillips curve is vertical at the natural rate of unemployment.

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