Which of the following best explains the negative slope of the short-run Phillips curve?
A) Short-run aggregate supply increases at the same pace as aggregate demand increases so that inflation and unemployment do not change.
B) Weak growth in aggregate demand keeps the economy below potential GDP, so unemployment rises but inflation falls.
C) Aggregate demand grows so quickly that the inflation rate rises as unemployment rises.
D) Long-run aggregate supply increases quickly enough that inflation falls as unemployment also falls.
B
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The long-run aggregate supply curve
a. is vertical b. is upward sloping c. is downward sloping d. is horizontal e. can have a variety of shapes depending on fiscal policy
Milton Friedman's macroeconomic theory and political philosophy have the relationship one would expect. He is a
A. Keynesian and a political liberal. B. new classical macroeconomist and a political liberal. C. monetarist and a political conservative. D. supply-sider and a political conservative.