The long-run Phillips curve shows the relationship between the inflation rate and the unemployment rate when the economy is
A) away from potential GDP.
B) in recession.
C) at full employment.
D) in expansion.
E) at full inflation.

Question

Quizplus · Accepted Answer

The long-run Phillips curve is vertical, indicating that there is no trade-off between inflation and unemployment when the economy is at full employment, or its natural rate of unemployment. This reflects the idea that in the long run, inflation does not affect the natural rate of unemployment.

The Long-Run Phillips Curve Shows the Relationship Between the Inflation