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Q. |
Which curve shows the inverse relationship between unemployment and inflation rates? |
A. | Supply curve |
B. | Indifference curve |
C. | IS curve |
D. | Phillips curve |
Answer» D. Phillips curve | |
Explanation: The Phillips curve shows the inverse relationship between inflation and unemployment: as unemployment decreases, inflation increases. The relationship, however, is not linear. Graphically, the short-run Phillips curve traces an L-shape when the unemployment rate is on the x-axis and the inflation rate is on the y-axis. |
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