Question

According to macroeconomic theory, evidence that high unemployment may be accompanied by low inflation, and low unemployment may be accompanied by high inflation is illustrated by the

Answer 1

The Keynesian Phillips curve tradeoff illustrates the fact that a high unemployment may be accompanied by low inflation and that a low unemployment may be accompanied by high inflation.

What is the Keynesian Phillips curve tradeoff?

The Keynesian Phillips Curve Tradeoff is the graph that shows the relationship between an unemployment rate and Inflation rate and explains that If one is higher, the other must be lower.

As Keynes argued that an inadequate overall demand could lead to prolonged periods of high unemployment, because of this, the Keynesian macroeconomics argues that the solution to a recession is expansionary fiscal policy that shifts the aggregate demand curve to the right.

Hence, this curve tradeoff is one that illustrates the fact that a high unemployment may be accompanied by low inflation and that a low unemployment may be accompanied by high inflation.

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