Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Interest Rates
B
Employment Rate
C
Aggregate Demand
D
Price Levels
Understanding the Answer
Let's break down why this is correct
Answer
Inflation and unemployment have a relationship that is often illustrated by the Phillips Curve, which suggests that when inflation rises, unemployment tends to fall, and vice versa. This means that if the economy is growing and more people are getting jobs, inflation may increase because demand for goods and services rises. Similarly, when we think about economic growth, we can relate it to a concept called "potential output," which is the maximum level of economic activity that can be sustained without causing inflation to rise. For example, if a country invests in technology and education, it may experience economic growth, leading to more jobs and higher productivity without triggering inflation. Therefore, just as inflation and unemployment are related, we can say that economic growth relates to potential output.
Detailed Explanation
When the economy grows, more jobs are created. Other options are incorrect because Some might think that economic growth directly affects interest rates; People may confuse economic growth with aggregate demand.
Key Concepts
Phillips Curve
Macroeconomic Indicators
Aggregate Demand
Topic
Phillips Curve Insights
Difficulty
easy level question
Cognitive Level
understand
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