A government decides to increase public spending significantly to stimulate the economy. Based on the Phillips Curve, what is the most likely outcome in the short term regarding inflation and unemployment in this scenario?

When a government increases public spending, it puts more money into the economy, which can lead to more jobs and lower unemployment in the short term. According to the Phillips Curve, there is an inverse relationship between inflation and unemployment; this means that as unemployment decreases, inflation tends to rise. For example, if the government builds new roads and schools, it creates jobs for construction workers and teachers. As more people earn money and spend it, demand for goods and services increases, which can drive prices up, leading to higher inflation. Therefore, in the short term, we can expect to see lower unemployment but higher inflation as a result of the increased public spending.