Question 29

The short-run Phillips curve shows a downward slope.

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

A) Vertical line

A vertical line represents a situation where changes in inflation do not affect unemployment, which contradicts the principle of the short-run Phillips curve. Thus, this option is incorrect.

B) Upward slope

An upward slope suggests that higher inflation is associated with higher unemployment, which is contrary to the findings of the short-run Phillips curve. Therefore, this option is also incorrect.

C) Downward slope

The short-run Phillips curve is characterized by a downward slope, which indicates that lower unemployment rates are associated with higher rates of inflation. This relationship highlights the trade-off policymakers face between inflation and unemployment in the short term.

D) Horizontal line

A horizontal line would imply that inflation remains constant regardless of unemployment changes, which does not reflect the dynamics described by the short-run Phillips curve. Hence, this option is not accurate.

Conclusion

The correct answer is the downward slope of the short-run Phillips curve, which clearly illustrates the trade-off between inflation and unemployment. All other options fail to represent this critical economic concept, highlighting the unique relationship depicted by the downward slope in the context of short-run economic policies.