The modern view of the Phillips curve indicates that in the long run there
A) is no trade-off between inflation and unemployment.
B) is a definite trade-off between unemployment and inflation.
C) will be a trade-off if the rational expectations hypothesis is correct.
D) may be a long-run trade-off between unemployment and inflation, but there is no such trade-off in the short run.

Question

Quizplus · Accepted Answer

The modern view of the Phillips curve states that in the long run there is no trade-off between inflation and unemployment. This is due to the fact that in the long run, expectations adjust to changes in inflation and unemployment rates, causing any short-term trade-off to disappear.

The Modern View of the Phillips Curve Indicates That in the Long