Economics • Economic BasicsEasy
What is represented by the 'Phillips Curve' in macroeconomics?
A. The inverse relationship between the rate of unemployment and the rate of inflation.✓ Correct Answer
B. The direct relationship between money supply growth and gross domestic product.
C. The proportional distribution of income inequality within a population.
D. The trade-off between fiscal deficit and current account deficit.
💡 Solution & Explanation
The Phillips Curve demonstrates an empirical inverse relationship between the rate of unemployment and the rate of wage or price inflation in an economy. When unemployment is low, inflationary pressures tend to rise because tighter labor markets drive up wages. This trade-off is a foundational principle taught in macroeconomic theory for civil services aspirants.
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