Which of the following statements is true about the Phillips Curve and Aggregate Supply curve?

Question

BlackTom AI · Accepted Answer

Along the Keynesian zone of the aggregate supply (AS) curve, the price level is relatively flat, so inflation remains low even when unemployment is high.

Relevant concepts:
- Aggregate Supply (AS) in the short run is often drawn with three zones: Keynesian (horizontal/flat at low output), intermediate (upward sloping), and classical (vertical at potential output). In the Keynesian zone, firms have excess capacity and prices/wages are sticky, so increases in demand raise output and lower unemployment without substantially raising prices (inflation stays low).
- The short-run Phillips Curve (SRPC) shows an inverse (negative) relationship between inflation and unemployment: lower unemployment tends to accompany higher inflation, and higher unemployment tends to accompany lower inflation, due to wage/price dynamics and demand pressures. The long-run Phillips Curve is vertical at the natural rate of unemployment.

Step-by-step reasoning:
1. In a recession or when output is well below potential, the economy lies in the Keynesian (horizontal) segment of the AS curve. Firms can increase output without bidding up prices because of idle capacity.
2. Because prices are sticky and excess capacity exists, inflation is low and relatively insensitive to changes in output here.
3. High unemployment corresponds to low aggregate demand and low price pressure, so inflation is low — exactly the situation described by the correct option.
4. The SRPC’s downward slope is consistent: high unemployment → lower inflation; low unemployment → higher inflation. Thus the Keynesian zone’s low inflation with high unemployment aligns with the SRPC’s logic.

Why the correct answer is correct:
- It correctly links the horizontal Keynesian AS segment (low inflation despite changes in output) with the Phillips curve intuition that high unemployment is associated with low inflation.

Why the other options are incorrect:
- "During a recession when GDP is below potential, inflation is high according to the Keynesian zone..." is wrong because the Keynesian zone implies low inflation when GDP is below potential.
- "The short-run Aggregate Supply and Phillips Curve curves are upward sloping." is incorrect: SRAS (in the intermediate zone) can be upward sloping, but the short-run Phillips Curve is downward sloping (negative relationship between inflation and unemployment).
- "They both have a positive relationship between both variables." is false because the SRPC represents a negative relationship (inflation vs. unemployment), so they do not both show positive relationships.

Conclusion: The correct statement is "Along the Keynesian zone of an AS curve, inflation is low when unemployment is high." This matches the provided answer.

Which of the following statements is true about the Phillips Curve and Aggregate Supply curve?单项选择题

类似问题

Which of the following is a Macroeconomics topic rather than a Microeconomics topic?

Is the following statement true or false? In the products of methylation-hydrolysis, every -OH group corresponds to the position of a glycosidic bond in the starting polysaccharide.

Which of the follwoing structures represents amylopectin?

Which of the following is true about an aldopentose?I. It is a monosaccharide.II. It contains a CHO groupIII. It is a disaccharide.IV. It is an oligosaccharide.

For stock A, we have 𝛽 𝑖 = 0.70. Suppose the expected market risk premium next year is 9% and the risk-free rate is 3%. What is the expected return of this stock based on the CAPM? (Please answer in % and round to 2 decimal places. If the answer is 8.057%, then in the box, write 8.06)

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单