Just as the aggregate-demand curve slopes downward only in the short run, the trade-off between inflation and unemployment holds only in the long run.

Question

Quizplus · Accepted Answer

The aggregate-demand curve slopes downward in both the short run and the long run, but the trade-off between inflation and unemployment, described by the Phillips curve, primarily holds in the short run. In the long run, there is no trade-off between inflation and unemployment according to the natural rate hypothesis.

Just as the Aggregate-Demand Curve Slopes Downward Only in the Short