Macroeconomics for Today
Macroeconomics for Today
10th Edition
ISBN: 9780357161494
Author: Irvin B. Tucker
Publisher: Cengage Learning US
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Chapter 17, Problem 1SQP
To determine

Define the short-run Philips curve.

Expert Solution & Answer
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Explanation of Solution

Short-run Philips curve represents the inverse relationship between inflation and unemployment in the economy. When inflation increases, then unemployment decreases and vice versa. An increase in the aggregate demand increases the inflation rate and this in turn, reduces the unemployment rate in the economy.

Economics Concept Introduction

Philips curve: Philips curve shows the inverse relationship between unemployment and inflation rate in the economy.

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