The short-run Phillips curve is downward sloping but the long-run is a vertical line.

Question

Quizplus · Accepted Answer

This statement is true. The short-run Phillips curve shows a negative relationship between inflation and unemployment, while the long-run Phillips curve is vertical because in the long run, changes in aggregate demand only affect the price level and not employment. This means that in the long run, there is no trade-off between unemployment and inflation.

The Short-Run Phillips Curve Is Downward Sloping but the Long-Run