The Phillips curve analysis described in Chapter 12 implies that there is a negative tradeoff between inflation and unemployment in:
A)both the short run and long run.
B)in the short run only.
C)in the long run only.
D)in neither the short run nor the long run.

Question

Quizplus · Accepted Answer

The Phillips curve analysis suggests that there is a negative relationship between inflation and unemployment in the short run. This implies that as inflation increases, unemployment decreases and vice versa. However, in the long run, the Phillips curve becomes vertical, suggesting that there is no tradeoff between inflation and unemployment in the long run. Therefore, the best choice is B, as there is a negative tradeoff between inflation and unemployment in the short run only.

The Phillips Curve Analysis Described in Chapter 12 Implies That