The long-run Phillips curve is ___________.
A) vertical at the natural unemployment rate
B) vertical at the actual inflation rate
C) horizontal at the actual inflation rate
D) horizontal at the expected inflation rate

Question

Quizplus · Accepted Answer

The long-run Phillips curve is vertical at the natural unemployment rate because in the long run, the economy will tend towards its potential output level and any changes in aggregate demand will only have an effect on the price level, not on unemployment. In other words, there is no sustainable tradeoff between inflation and unemployment in the long run.

The Long-Run Phillips Curve Is ___________