Which of the following does the long-run Phillips curve tell us?
A) That the Fed can select any rate of unemployment it wants in the long run
B) That the Fed can select any rate of inflation and unemployment rate it wants in the long run
C) That the Fed can select neither the rate of inflation nor the rate of unemployment in the long run
D) That there is a tradeoff between the rate of inflation and the rate of unemployment in the long run
E) That the Fed can select any rate of inflation it wants in the long run

Question

Quizplus · Accepted Answer

In the long run, the Phillips curve is vertical, indicating that there is no tradeoff between inflation and unemployment. The Fed can influence the inflation rate but not the natural rate of unemployment.

Which of the Following Does the Long-Run Phillips Curve Tell