WBCS.LIVE practice question

The Phillips curve illustrates the macroeconomic relationship between which of the following variables?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Tax rates and total tax revenue
  2. Rate of inflation and rate of unemployment
  3. Economic growth and environmental degradation
  4. Income inequality and economic development

Correct answer and explanation

Correct answer: Rate of inflation and rate of unemployment

Explanation: āœ… Correct Answer: B) Rate of inflation and rate of unemployment šŸ“š Explanation: The Phillips curve represents the inverse relationship between the rate of inflation and the rate of unemployment in an economy. It suggests that economic growth comes with inflation, which in turn leads to more jobs and less unemployment. However, this concept was challenged during the 1970s when stagflation occurred, featuring both high inflation and high unemployment simultaneously.