ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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As inflation of the economy increases what happens to the unemployment rate of the economy?
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Unemployment increases
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Unemployment decreases
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Either A or B
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None of the above
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Explanation:
Detailed explanation-1: -If levels of unemployment decrease, inflation increases. The relationship is negative and not linear. Graphically, when the unemployment rate is on the x-axis, and the inflation rate is on the y-axis, the short-run, Phillips curve takes an L-shape. It can be shown by a graph as below.
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