There is no long-run trade-off between inflation and unemployment.

Question

Quizplus · Accepted Answer

This is known as the Phillips Curve theory, which suggests that there is a short-term trade-off between inflation and unemployment, but in the long run, there is no trade-off. This is because as unemployment falls below its natural rate, the inflation rate eventually accelerates, rather than staying constant. Therefore, policymakers cannot permanently decrease unemployment by allowing higher inflation.

There Is No Long-Run Trade-Off Between Inflation and Unemployment