If the AS curve shifts from year to year, but the AD curve does not, then the Phillips curve would show A

Economics Dec 12, 2020

If the AS curve shifts from year to year, but the AD curve does not, then the Phillips curve would show A. a negative relationship between the inflation and unemployment rates. B. a positive relationship between the inflation and unemployment rates. C. a constant trade-off between the inflation and unemployment rates. D. no particular relationship between the inflation and unemployment rates.

Expert Solution

Option B.

The Philips curve shows that the inflation rate and unemployment rate are negatively related to each other.
This is because when the inflation rate increases within the Economy, the output produced and supplied within the economy Increases.
This will lead to a fall in the unemployment rates. But if the supply keeps varying when the demand is constant, then the unemployment rate would start to rise even when Inflation rate rises.

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