Economics • Economic BasicsEasy
What does the 'Phillips Curve' traditionally illustrate in macroeconomic analysis?
A. The direct relationship between money supply and inflation
B. The inverse relationship between the rate of unemployment and the rate of inflation✓ Correct Answer
C. The trade-off between economic growth and government fiscal deficit
D. The relationship between interest rates and savings
💡 Solution & Explanation
The Phillips Curve illustrates the short-run inverse relationship between the rate of unemployment and the rate of inflation, implying policy trade-offs for central banks. Distractors incorrectly link it to fiscal deficits or money supply directly without mentioning the labor market variables.
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