The long-run Phillips curve is ________ and equal to ________.
A) horizontal; the natural rate of unemployment
B) vertical; the natural rate of unemployment
C) vertical; full-employment output
D) horizontal; full-employment inflation
E) horizontal; full-employment output

Question

Quizplus · Accepted Answer

The long-run Phillips curve is vertical because in the long run, the economy will return to the natural rate of unemployment regardless of the rate of inflation. This means that there is no trade-off between inflation and unemployment in the long run, and the only factor that affects the rate of inflation is the growth rate of the money supply. Therefore, the long-run Phillips curve is equal to the natural rate of unemployment.

The Long-Run Phillips Curve Is ________ and Equal to ________

The Long-Run Phillips Curve Is and Equal to