Obtain monthly data on the unemployment rate and the inflation rate for the last 2 years. (This data can be found at www.bls.gov or in a recent issue of the Survey of Current Business or in the Monthly Labor Review or Employment and Earnings, all published by the government and available in many college libraries.)

a. What trends do you observe? Can you explain what you see using aggregate supply and aggregate demand curves?

b. Plot the 24 monthly rates on a graph with the unemployment rate measured on the x-axis and the inflation rate on the y-axis. Is there evidence of a trade-off between these two variables? Provide an explanation.