Suppose an economy is at an unemployment level that corresponds to the potential output level.Which curve would represent this situation?
A) the long-run Phillips curve
B) the short-run Phillips curve
C) the mid-term Phillips curve
D) the self-correcting Phillips curve

Question

Suppose an economy is at an unemployment level that corresponds to the potential output level.Which curve would represent this situation?  
A) the long-run Phillips curve 
B) the short-run Phillips curve 
C) the mid-term Phillips curve 
D) the self-correcting Phillips curve

Quizplus · Accepted Answer

The long-run Phillips curve represents the situation where the economy is at its natural rate of unemployment, which corresponds to the potential output level. It is vertical, indicating that in the long run, there is no trade-off between inflation and unemployment.

Suppose an Economy Is at an Unemployment Level That Corresponds