The diagram shows a curve representing the relationship between a country's unemployment rate and its inflation rate. Why is it likely that this curve only applies in the short run?
A.
Any attempt to reduce unemployment will increase inflation.
B.
Increased inflation actually increases unemployment.
C.
Increased inflation leads to expectations of further inflation.
D.
Increased inflation reduces real wage rates, which increases the demand for labour.
Exam No：9708_w24_qp_33 Year：2024 Question No：21
Answer:
C
Knowledge points:
10.2.3 relationship between growth and inflation
10.2.5.1 traditional Phillips curve
10.2.5.2 expectations-augmented Phillips curve (short- and long-run Phillips curve)
Solution:
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