Which of the following is a true statement?
A) Under normal conditions, there is a short-run trade-off between inﬂation and unemployment.
B) There is a long-run trade-off between inﬂation and unemployment.
C) The short-run Phillips Curve is vertical.
D) The long-run Phillips Curve is horizontal.

Question

Quizplus · Accepted Answer

The short-run Phillips Curve shows that there is a trade-off between inﬂation and unemployment in the short-run. This means that when inflation is low, unemployment tends to be high and vice versa. However, in the long-run, this trade-off disappears and there is no relationship between inflation and unemployment. Therefore, option B, C, and D are incorrect statements.

Which of the Following Is a True Statement