Which one of the following statements is true about the Phillips curve?
A)The short-run Phillips curve is positively sloped while the long-run Phillips curve is vertical.
B)There is no empirical evidence to support the Phillips curve.
C)The short-run Phillips curve is negatively sloped while the long-run Phillips curve is vertical.
D)The Phillips curve is consistent with the Keynesian model but not the Classical model.

Question

Quizplus · Accepted Answer

The short-run Phillips curve is negatively sloped because there is an inverse relationship between inflation and unemployment in the short run. However, in the long run, there is no trade-off between inflation and unemployment and the Phillips curve becomes vertical. This is because in the long run, any attempts by policymakers to lower unemployment through expansionary monetary policy will result in only temporary reductions in unemployment without affecting the inflation rate.

Which One of the Following Statements Is True About the Phillips