The short-run Phillips Curve intersects the long-run Phillips Curve at the:
A) Nominal rate of interest
B) Current rate of inflation
C) Real interest rate
D) Natural rate of unemployment

Question

Quizplus · Accepted Answer

The short-run Phillips Curve shows the relationship between unemployment and inflation in the short-run, while the long-run Phillips Curve shows the relationship between unemployment and inflation in the long-run when wages and prices have fully adjusted. The intersection of the two curves represents the natural rate of unemployment, at which there is no trade-off between inflation and unemployment in the long-run. Therefore, the best choice is D, natural rate of unemployment.

The Short-Run Phillips Curve Intersects the Long-Run Phillips Curve at The