Comparing the short-run Phillips curve and the long-run Phillips curve, we see that there is
A) a tradeoff in both curves.
B) only a long-run tradeoff between inflation and unemployment but not a short-run tradeoff.
C) no tradeoff in either curve.
D) only a short-run tradeoff between inflation and unemployment but not a long-run tradeoff.
E) no relationship between the two curves.

Question

Quizplus · Accepted Answer

The short-run Phillips curve shows a tradeoff between inflation and unemployment in the short run, but in the long run, the Phillips curve is vertical and there is no tradeoff between inflation and unemployment, which means there is a natural rate of unemployment where the economy is at its potential output level. Therefore, only the short-run Phillips curve shows a tradeoff between inflation and unemployment, whereas, in the long run, there is only one level of unemployment, which is the natural rate of unemployment.

Comparing the Short-Run Phillips Curve and the Long-Run Phillips Curve