As world economies recover from the financial crisis in 2008 and 2009, the U.S. economy returns to full employment and expected inflation equals actual inflation,

Question

Quizplus · Accepted Answer

The long-run Phillips curve shows the relationship between unemployment and inflation when the economy is at its potential level of output, and it is not affected by short-run fluctuations such as changes in aggregate demand. As the economy recovers and returns to full employment, the short-run Phillips curve will shift to the left, but eventually, inflation expectations will adjust, and the short-run Phillips curve will shift back to its original position, aligning with the long-run Phillips curve. Therefore, there will be a movement back to the long-run Phillips curve.

As World Economies Recover from the Financial Crisis in 2008