The newer view of the Phillips curve implies that
A)the natural rate of unemployment can be reduced by expansionary monetary policy
B)in the long run unemployment does not move towards a natural rate if there is frictional unemployment
C)an increase in monetary growth affects unemployment and inflation in the short run, but only affects inflation in the long run
D)there is a clear inverse relationship between unemployment and output
E)stagflation can best be addressed by implementing expansionary fiscal policies

Question

Quizplus · Accepted Answer

The newer view of the Phillips curve suggests that in the short run, both unemployment and inflation can be influenced by changes in monetary policy (e.g., through monetary growth). However, in the long run, the effect of monetary policy is primarily on inflation, not on unemployment, which tends to return to its natural rate regardless of inflation. This reflects the understanding that monetary policy can have real effects in the short term but is neutral in terms of real variables like unemployment in the long term, affecting only nominal variables like the price level or inflation rate.

The Newer View of the Phillips Curve Implies That