The AD-AI analysis in conjunction with the Phillips curve relationship shows that
A)it is impossible to trade higher inflation for lower unemployment in the short run.
B)there is no long-run gain from expansionary monetary policy.
C)inflation and unemployment are positively correlated in the long run.
D)it is possible to trade lower inflation for higher unemployment in the long run.
E)there is no short-run gain from expansionary monetary policy.

Question

Quizplus · Accepted Answer

The Phillips curve illustrates the trade-off between inflation and unemployment, suggesting that in the short run, lower unemployment can be achieved at the cost of higher inflation through expansionary monetary policy. However, in the long run, expectations adjust, and the trade-off disappears, leading to no long-run gain from such policies.

The AD-AI Analysis in Conjunction with the Phillips Curve Relationship