Question:
Consider a short-run Phillips curve with a constant expected rate of inflation. If the aggregate demand decreases unexpectedly and the labour force remains the same, then what will happen to aggregate price and unemployment rate?
Consider a short-run Phillips curve with a constant expected rate of inflation. If the aggregate demand decreases unexpectedly and the labour force remains the same, then what will happen to aggregate price and unemployment rate?
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Updated On: Oct 1, 2024
- Aggregate price rises and unemployment rate falls
- Aggregate price falls and unemployment rate rises
- Aggregate price rises and unemployment rate rises
- Aggregate price falls and unemployment rate falls
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The Correct Option is B
Solution and Explanation
The correct answer is (B): Aggregate price falls and unemployment rate rises
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