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The negative relationship between the inflation rate and the unemployment rate is known as the:

A) short-run Phillips curve.
B) short-run aggregate supply curve.
C) long-run Phillips curve.
D) aggregate demand curve.

1 Answer

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Final answer:

The negative relationship between the inflation rate and the unemployment rate is known as the short-run Phillips curve, which indicates a tradeoff between inflation and unemployment in the short run. Option a is the answer.

Step-by-step explanation:

The negative relationship between the inflation rate and the unemployment rate is known as the A) short-run Phillips curve. This concept was first introduced from a Keynesian perspective, which indicated a tradeoff between inflation and unemployment in the short run due to the upward sloping short-run aggregate supply curve. Conversely, in the neoclassical viewpoint, the long-run aggregate supply curve is vertical, suggesting there is no long-term tradeoff between inflation and unemployment, leading to a vertical long-run Phillips curve. This curve remains at a consistent level of unemployment regardless of the inflation rate, given the economy's natural rate of unemployment.

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