2016 · Q58
Which of the following statement(s) is / are true with respect to Phillips Curve?
- 1It shows the trade-off between unemployment and inflation
- 2The downward sloping curve of Phillips Curve is generally held to be valid only in the short run
- 3In the long run, Phillips Curve is usually thought to be horizontal at the non-accelerating inflation rate of unemployment (NAIRU)
Select the correct answer using the code given below :
General KnowledgeIndian Economy
- A1 only
- B2 and 3 only
- C1 and 2 only
- D1, 2 and 3
Explanation
Statement 1 is true: the Phillips Curve depicts the short-run trade-off between unemployment and inflation. Statement 2 is true: the downward-sloping curve is generally regarded as valid only in the short run. Statement 3 is false: in the long run the Phillips Curve is thought to be vertical at the NAIRU (the natural rate of unemployment), not horizontal. Statements 1 and 2 are true, giving option (C).