Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
As unemployment rates decrease, inflation increases
B
As unemployment rates increase, inflation increases
C
Unemployment rates and inflation are not related
D
As inflation increases, unemployment rates decrease
Understanding the Answer
Let's break down why this is correct
Answer
The Phillips Curve shows an expected relationship between unemployment rates and inflation, suggesting that when unemployment is low, inflation tends to be high, and when unemployment is high, inflation tends to be low. This happens because when many people have jobs, they have more money to spend, which can lead to higher prices for goods and services. On the other hand, when unemployment is high, there are fewer people spending money, which can lead to lower prices. For example, if a company is hiring a lot of workers and paying them well, it might raise its prices because everyone is buying more. Overall, the idea is that there is a trade-off between how many people are working and the rates at which prices rise.
Detailed Explanation
When fewer people are unemployed, they have more money to spend. Other options are incorrect because This option suggests that more unemployment means higher prices; This choice says unemployment and inflation are not connected.
Key Concepts
inflation relationship
Topic
Unemployment Rates and Economic Indicators
Difficulty
easy level question
Cognitive Level
understand
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