A trade-off between aggregate output and inflation
A) is theoretically possible, but has never been observed in practice.
B) may exist in the short run, but not in the long run.
C) may exist in the long run, but not in the short run.
D) exists in both the short run and the long run.

Question

Quizplus · Accepted Answer

In the short run, there can be a trade-off between output and inflation, as described by the Phillips Curve. However, in the long run, this trade-off does not exist because expectations adjust, and the economy returns to its natural rate of output.

A Trade-Off Between Aggregate Output and Inflation