Question

The​ short-run phillips curve shows​ that, other things remaining the​ same, _______.

Answer 1

The short-run Phillips curve showcases a trade-off where a rise in the inflation rate and a fall in the unemployment rate occur together. This is because attempts to control inflation in the short term often result in changes in unemployment. However, in the long run, the natural rate of unemployment is not affected by inflation rates.

Step-by-step explanation:

The short-run Phillips curve illustrates a tradeoff between the inflation rate and the unemployment rate, suggesting that if one is to be decreased, the other must increase if everything else remains constant. As such, the correct answer to the question is that there is the presence of a trade-off where a rise in the inflation rate and a fall in the unemployment rate occur together.

To exemplify, if a government aims to reduce inflation from 5% to 2%, the curve predicts the unemployment rate would increase from 4% to 7%, demonstrating that efforts to control inflation can result in higher unemployment in the short run. However, the long-run Phillips curve, informed by economists like Milton Friedman, indicates that this tradeoff doesn't hold in the long run. The long-run curve is vertical at the natural rate of unemployment, meaning that any attempt to change the inflation rate in the long term does not affect the natural rate of unemployment.

Answer 2

The short- run Phillips curve shows the relationship between inflation and the unemployment rate for a given level of anticipated inflation and natural unemployment rate
The​ short-run Phillips curve shows​ that, other things remaining the​ same, real GDP increases above potential GDP.