If actual inflation is correctly expected and built into people's wage and price-setting decisions, the Phillips curve:
A)becomes a horizontal line.
B)becomes a vertical line.
C)remains a downward sloping line.
D)becomes an upward sloping line.

Question

Quizplus · Accepted Answer

When actual inflation is correctly anticipated and incorporated into wage and price-setting decisions, the Phillips curve becomes vertical. This indicates that there is no trade-off between inflation and unemployment in the long run, as the economy adjusts to expected inflation.

If Actual Inflation Is Correctly Expected and Built into People's