Which of the following is part of the modern view of the Phillips curve?
A) When inflation exceeds what was anticipated, unemployment falls below the natural rate.
B) When inflation is less than anticipated, unemployment will rise above the natural rate.
C) Demand stimulus policies can temporarily reduce unemployment, but in the long run, their primary impact will be on prices (inflation).
D) All of the above are correct.

Question

Quizplus · Accepted Answer

The modern view of the Phillips curve includes all of the statements listed in options A, B, and C. This means that when inflation is higher than expected (option A), unemployment will likely fall below the natural rate. Conversely, when inflation is lower than expected (option B), unemployment may increase above the natural rate. Demand stimulus policies may also initially reduce unemployment, but ultimately their primary impact will be on prices or inflation (option C). Therefore, D is the best answer.

Which of the Following Is Part of the Modern View