In the early 1980s the bank of Canada increased interest rates to 20%. The bank of Canada argued that it had to do this fight inflation, but it also had the following effects:

A. Unemployment decreased, workers' wages increased and profits decreased
B. Unemployment decreased, workers' wages decreased and profits increased
C. Unemployment increased, workers' wages increased and profits decreased
D. Unemployment increased, workers' wages decreased and profits increased
E. Unemployment decreased, workers' wages increased and profits increased

Phillips curve

do you knoe which answer is right? cuz i dont understand it

Edit:

D

Misread

This post was edited by Slipknot-fan on Apr 21 2013 06:41pm

will the unemplyment decreased when interest rate is high?

Edited my answer, misread the question ...

when inflation goes up , unemployment goes down

when inflation goes down, unemployment goes up

Thats what the Phillips curve say

why wages decreased?

unemployment goes up , which means employers can lower the paychecks cause theres an asymmetry in the demands of job versus offer of job

ok i got it thanks