If prices and wages are perfectly flexible, there is never any tradeoff between inflation and unemployment.

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Quizplus · Accepted Answer

If prices and wages are perfectly flexible, changes in money supply will not affect employment and inflation rates. Thus, there is no tradeoff between inflation and unemployment in this scenario. This assumption is the basis of the classical theory of macroeconomics. However, this assumption is not realistic in the real world as prices and wages are not always perfectly flexible due to various frictions and rigidities.

If Prices and Wages Are Perfectly Flexible, There Is Never