SSC CGL 2024 Tier-I · 13 September 2024, Shift 2 · General Awareness · Question 15 of 99

Text as printed on a candidate's response sheet for this shift; answer per SSC's tentative key as marked on that sheet. Solution last reviewed 10 September 2026.

Where this paper and its answers come from

SSC does not publish CGL question papers or a public answer key. The questions and options here are reproduced as printed on a candidate's own response sheet for this shift — the Commission's text, unchanged. Each answer is SSC's tentative key as marked on that sheet; SSC allowed challenges to it and never publishes a final key. The solutions are written by UnlockIAS.

What is the empirically fitted relationship between the rate of change of money, wage, and rate of unemployment known as?

(a)Keynesian model
(b)Philips curve
(c)Friedman’s model
(d)Baumol hypothesis

Answer

Why

Correct — B. The Phillips curve is exactly what the stem describes: an empirically fitted relation between the rate of change of money wages and the rate of unemployment.

A. W. Phillips fitted it in 1958 from United Kingdom data covering 1861 to 1957, and found the two move in opposite directions — wages rise fastest when unemployment is lowest.

The words 'empirically fitted' are the giveaway: this is a curve drawn through observed data, not a model deduced from assumptions. Option (b).

Why the others are wrong

(a)
Keynesian model — The Keynesian model explains output and employment through aggregate demand. It is a theoretical construction about spending, not a line fitted through wage and unemployment observations.
(c)
Friedman’s model — Milton Friedman's work came a decade later — the expectations-augmented argument that there is no lasting wage-unemployment trade-off. He attacked the fitted relation rather than producing it.
(d)
Baumol hypothesis — Baumol's name attaches to the inventory-theoretic model of the transactions demand for money — how much cash to hold between pay days. There is no unemployment variable in it.

Concept

The original curve puts the rate of change of money wages on one axis and the unemployment rate on the other. The fitted line slopes downward and is steep at low unemployment.

Later writers replaced wage inflation with price inflation, and that is the version most textbooks now draw.

For a while the relation was read as a policy menu — accept more inflation, buy less unemployment. The 1970s ended that reading, when high inflation and high unemployment arrived together.

The paper prints the option as 'Philips curve', with one l. The economist is A. W. Phillips, and the option text is reproduced here exactly as SSC printed it.

Key facts

The Phillips curve relates the rate of change of money wages to the rate of unemployment.
A. W. Phillips fitted it in 1958 using United Kingdom data for 1861 to 1957.
The relation is inverse: lower unemployment goes with faster money-wage growth.
Later versions of the curve replace wage inflation with price inflation.

Study next

The expectations-augmented Phillips curve and the natural rate of unemploymentStagflation and why the simple inflation-unemployment trade-off broke downTypes of unemployment: frictional, structural, cyclical, seasonal and disguised

Common traps

Attaching the curve to Keynes because it is a demand-side idea.
Reading the modern inflation version back into a stem that says money wages.

SSC pairs an economist's name to a relation and asks you to match them. Unemployment vocabulary is asked directly at 11 Sep 2024, 16:00, GA Q.18 (seasonal unemployment), and the Keynesian label is the pairing to reject at 23 Sep 2024, 12:30, GA Q.15.

Related PYQs

No directly related past PYQ was found.