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Which of the following illustrates an inverse relationship between the rates of inflation and unemployment?

A. The aggregate demand curve
B. The Laffer Curve
C. The aggregate supply curve
D. The Phillips Curve

User Kah Tang
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Final answer:

The correct answer is D. The Phillips Curve, which represents the inverse relationship between inflation and unemployment according to Keynesian economic theory, with a downward-sloping orientation in the short term.

Step-by-step explanation:

illustrates an inverse relationship between the rates of inflation and unemployment:

The illustration of an inverse relationship between the rates of inflation and unemployment is best represented by D. The Phillips Curve. This concept originates from the Keynesian economic theory, which posits that there's a tradeoff between inflation and unemployment. Specifically, a downward-sloping Phillips curve indicates that higher levels of unemployment are associated with lower levels of inflation, and the reverse is also true. However, it's important to note that this is considered a short-term relationship, as the curve may shift over time.

The alternative options, such as the aggregate demand curve, the Laffer Curve, and the aggregate supply curve, do not directly illustrate this inverse relationship. The aggregate supply and demand curves pertain to the levels of total production and overall demand in the economy, while the Laffer Curve deals with tax rates and government revenue.

User Ivo Stoyanov
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