The long-run Phillips curve is vertical.

Question

Quizplus · Accepted Answer

The long-run Phillips curve, also known as the natural rate of unemployment, is vertical because it is based on the idea that in the long run, changes in inflation do not have a permanent effect on employment. Instead, the natural rate of unemployment is determined by structural factors such as demographics, technology, and institutions. This vertical relationship implies that any attempt to permanently reduce unemployment through inflationary policies will only result in higher inflation without any sustained improvement in employment levels.

The Long-Run Phillips Curve Is Vertical