The long-run Phillips curve is a vertical line because
A) the unemployment rate decreases when the inflation rate increases.
B) there is no relationship between the natural unemployment rate and the inflation rate.
C) the natural unemployment rate only depends on the inflation rate.
D) real GDP does not depend on the unemployment rate.
E) in the long run, the natural unemployment rate increases when inflation increases.

Question

Quizplus · Accepted Answer

The long-run Phillips curve is a vertical line because there is no relationship between the natural unemployment rate and the inflation rate. This means that in the long run, changes in the inflation rate will not affect the natural rate of unemployment, which is determined by structural factors such as demographics and technology. The economy will always tend towards this natural rate of unemployment in the long run, regardless of the inflation rate.

The Long-Run Phillips Curve Is a Vertical Line Because