5. The Phillips curve in the late 20th century The following table shows selecte

Question

5. The Phillips curve in the late 20th century The following table shows selected data on unemployment and inflation in the United States between 1961 and 1965. Unemployment Rate (Percent) Year 1961 1962 1963 1964 1965 5.5 5.7 5.2 4.5 Inflation Rate (Percent) 1.0 1.0 1.3 1.3 1.6 Plot the data for these five years on the following graph Note: You will not be graded on how you plot the points, but plotting the points accurately on the graph will allow you to examine the relationship between unemployment and inflation during this period and solve the problems that follow

Explanation / Answer

Option A

Unemployment Rate decreases and Inflation Rate increases.

The decreases in aggregate supply shifts the short run Phillips Curve to the right which includes an increase in the expected inflation.

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