Question 32

The short-run Phillips curve is downward sloping.

The short-run Phillips curve illustrates an inverse relationship between inflation and unemployment, indicating that as inflation increases, unemployment tends to decrease, and vice versa.

A) vertical

The vertical representation of the Phillips curve suggests that there is no trade-off between inflation and unemployment, which contradicts the short-run dynamics where policymakers can exploit this trade-off. Therefore, this option is incorrect.

B) upward sloping

An upward sloping Phillips curve would imply that as inflation rises, unemployment also rises, which is inconsistent with the observed short-run relationship where higher inflation is associated with lower unemployment. Hence, this option is incorrect.

C) downward sloping

This option accurately reflects the short-run Phillips curve's depiction of the trade-off between inflation and unemployment. In the short run, lower unemployment can lead to higher inflation, making this the correct answer.

D) horizontal

A horizontal Phillips curve would suggest that inflation can vary without impacting unemployment, which does not align with the short-run analysis of the relationship between these two economic variables. Thus, this option is incorrect.

Conclusion

The downward sloping nature of the short-run Phillips curve effectively captures the inverse relationship between inflation and unemployment, highlighting the trade-off in policy decisions. All other options fail to accurately depict this relationship, reinforcing why option C is the definitive correct answer.