Question

According to the Phillips curve, policymakers could reduce both the inflation rate and the unemployment rate by Group of answer choices increasing the money supply. raising taxes. increasing government expenditures None of the other answers is correct

Answer 1

Answer:

None of the other answers is correct.

Explanation:

Williams A. Phillips was a notable economist born in New Zealand. Phillips wrote a famous article titled "The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957" published in 1958 by Economica. In the article, he used data for the United Kingdom (U.K) to illustrate on a graph, a negative or inverse relationship between the rate of change of employee wages in the U.K and the unemployment rate in the United Kingdom (U.K).

Consequently, using the Phillips curve it is practically impossible for policymakers to reduce both the inflation rate and the unemployment rate because as the inflation rate decreases; the unemployment rate increases and vice-versa.

However, according to the Phillips curve, policymakers can reduce inflation and increase unemployment if aggregate demand is contracted.