Which statement characterizes the long-run Phillips curve?
A) Its position is determined primarily by monetary factors.
B) If it shifts right, long-run aggregate supply shifts right.
C) It cannot be changed by any government policy.
D) Its position depends on the natural rate of unemployment.

Question

Quizplus · Accepted Answer

The long-run Phillips curve shows the relationship between the unemployment rate and inflation when the economy is at potential GDP in the long run. It is determined by structural factors such as the natural rate of unemployment, which is the rate at which the economy experiences no upward or downward pressure on the inflation rate. Therefore, the position of the long-run Phillips curve depends on the natural rate of unemployment.

Which Statement Characterizes the Long-Run Phillips Curve