The long-run Phillips curve indicates that
A) any inflation rate is possible at the natural unemployment rate.
B) any unemployment rate is possible at the natural inflation rate.
C) there is a tradeoff between the inflation rate and the unemployment rate in the long run.
D) potential GDP can never be achieved.
E) there is no way to control the inflation rate in the long run.

Question

Quizplus · Accepted Answer

The long-run Phillips curve is vertical at the natural rate of unemployment, indicating that in the long run, there is no trade-off between inflation and unemployment. This means any inflation rate can be associated with the natural rate of unemployment, as inflation expectations adjust over time.

The Long-Run Phillips Curve Indicates That