In the long run, unemployment will be at the natural rate. This implies that
A) there is a one-to-one relationship between unemployment and inflation and consequently, the long-run Phillips curve is vertical.
B) there is no relationship between unemployment and inflation and consequently, the long-run Phillips curve is vertical.
C) there is a positive relationship between unemployment and inflation and consequently, the long-run Phillips curve is upward-sloping.
D) there is a negative relationship between unemployment and inflation and consequently, the long-run Phillips curve is downward-sloping.

Question

Quizplus · Accepted Answer

The natural rate of unemployment refers to the level of unemployment that exists in the economy when it is operating at its potential level of output. At this level, there is no relationship between unemployment and inflation, meaning that changes in unemployment do not lead to changes in inflation. Therefore, the long-run Phillips curve is vertical.

In the Long Run, Unemployment Will Be at the Natural