Consider the following statements about the Phillips Curve: 1. It depicts relation between inflation and unemployment. 2. It is represented by a downward sloping curve. Which of the statements given above is/are correct?
Consider the following statements about the Phillips Curve:
1. It depicts relation between inflation and unemployment.
2. It is represented by a downward sloping curve.
Which of the statements given above is/are correct?
Options
- a.
1 only
- b.
2 only
- c.Correct answer
Both 1 and 2
- d.
Neither 1 nor 2
Explanation
· The Phillips Curve a graphic curve depicting an empirical observation of the relationship between the level of unemployment and the rate of change of money wages and, by inference, the rate of change of prices.
· A.H. Phillips (1914-75) proposed that there was a trade-off between inflation and unemployment–the lower the unemployment rate, the higher the inflation rate–governments simply need to choose the right balance between the two evils.
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