The long-run Phillips Curve is vertical at:
A) Price level of 100
B) The natural rate of unemployment
C) The natural rate of inflation
D) Potential GDP

Question

Quizplus · Accepted Answer

The long-run Phillips Curve shows the relationship between inflation and the unemployment rate in the long run. In the long run, changes in the inflation rate are primarily driven by changes in the money supply, so the long-run Phillips Curve is vertical. The natural rate of unemployment is the rate at which there is neither upward nor downward pressure on the inflation rate. This means that the long-run Phillips Curve is vertical at the natural rate of unemployment. Therefore, the correct answer is B, the natural rate of unemployment.

The Long-Run Phillips Curve Is Vertical At