PRC-3 · Chapter 18 · Question 33 of 33
According to the traditional short-run Phillips Curve, if the government enacts policies to aggressively drive unemployment down to zero, it must be willing to accept:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Significantly higher inflation
Explanation
The short-run Phillips curve illustrates a trade-off: pushing unemployment very low tightens the labor market, driving up wages and creating higher inflation.
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