The short-run Phillips curve and the long-run Phillips curve intersect at the___________ and___________
A) expected inflation rate; the expected employment rate
B) expected inflation rate; the natural unemployment rate
C) expected inflation rate; the expected unemployment rate
D) natural inflation rate; the expected employment rate

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows a trade-off between inflation and unemployment in the short run, implying that as unemployment decreases, inflation increases, and vice versa. In the long run, however, the Phillips curve becomes vertical at the natural rate of unemployment, indicating that there is no trade-off between inflation and unemployment in the long run. Thus, the short-run Phillips curve and the long-run Phillips curve intersect at the natural rate of unemployment and the expected inflation rate. Therefore, choice B is the correct answer.

The Short-Run Phillips Curve and the Long-Run Phillips Curve Intersect