Skip to main content
Back

Short Run Phillips Curve quiz

Control buttons has been changed to "navigation" mode.
1/15
  • What does the short-run Phillips curve illustrate?
    It illustrates the inverse relationship between inflation and unemployment: as inflation rises, unemployment falls, and vice versa.
  • What happens to unemployment when inflation increases according to the short-run Phillips curve?
    Unemployment decreases as inflation increases.
  • How does aggregate demand affect inflation and unemployment in the AD-AS model?
    Higher aggregate demand raises inflation and lowers unemployment, while lower aggregate demand decreases inflation and increases unemployment.
  • What are the axes on the short-run Phillips curve graph?
    The y-axis represents the inflation rate, and the x-axis represents the unemployment rate.
  • Why is it difficult to control both inflation and unemployment simultaneously?
    Because they have an inverse relationship; reducing one often causes the other to increase.
  • What happens to GDP and employment when aggregate demand increases?
    GDP increases and more workers are needed, leading to higher employment and lower unemployment.
  • If aggregate demand decreases, what happens to price levels and unemployment?
    Price levels decrease (lower inflation), and unemployment increases due to less demand for workers.
  • How is the short-run Phillips curve derived from the AD-AS model?
    By comparing different aggregate demand scenarios and plotting their corresponding inflation and unemployment rates.
  • What does a downward-sloping short-run Phillips curve indicate?
    It indicates an inverse relationship between inflation and unemployment.
  • In the example, what was the inflation rate when aggregate demand was high?
    The inflation rate was 6% when aggregate demand was high.
  • What was the unemployment rate when aggregate demand was high in the example?
    The unemployment rate was 4% when aggregate demand was high.
  • What was the inflation rate when aggregate demand was low in the example?
    The inflation rate was 2% when aggregate demand was low.
  • What was the unemployment rate when aggregate demand was low in the example?
    The unemployment rate was 7% when aggregate demand was low.
  • What is the key takeaway about the relationship between inflation and unemployment from the short-run Phillips curve?
    As inflation increases, unemployment decreases, and as inflation decreases, unemployment increases.
  • How does the short-run Phillips curve differ from other economic curves?
    Its axes are inflation rate and unemployment rate, rather than price and quantity.