If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve,
A)unemployment equals the natural rate and expected inflation equals actual inflation.
B)unemployment is above the natural rate and expected inflation equals actual inflation.
C)unemployment equals the natural rate and expected inflation is greater than actual inflation.
D)None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

When the short-run Phillips curve and long-run Phillips curve intersect at a point, it means that the economy has reached its long-run equilibrium. This implies that the unemployment rate is equal to the natural rate and the inflation rate is equal to the expected inflation rate. Thus, option A is the correct answer.

If the Economy Is at the Point Where the Short-Run