In the self-correction and the long-run Phillips curve, at point b actual inflation (4%) is above expected inflation (0%). Then inflation expectations will start to rise, and the Phillips curve will shift upward, moving the economy to point c. According to the natural rate hypothesis, there is _____ between inflation and unemployment, and thus the long-run Phillips curve is _____.
A) no permanent trade off; a vertical line
B) permanent trade off; a vertical line
C) no permanent trade off; undetermined
D) permanent trade off; undetermined

Question

In the self-correction and the long-run Phillips curve, at point b actual inflation (4%) is above expected inflation (0%). Then inflation expectations will start to rise, and the Phillips curve will shift upward, moving the economy to point c. According to the natural rate hypothesis, there is _____ between inflation and unemployment, and thus the long-run Phillips curve is _____. 
A) no permanent trade off; a vertical line 
B) permanent trade off; a vertical line 
C) no permanent trade off; undetermined 
D) permanent trade off; undetermined

Quizplus · Accepted Answer

The Answer of In the self-correction and the long-run Phillips curve, at point b actual inflation (4%) is above expected inflation (0%). Then inflation expectations will start to rise, and the Phillips curve will shift upward, moving the economy to point c. According to the natural rate hypothesis, there is _____ between inflation and unemployment, and thus the long-run Phillips curve is _____. 
A) no permanent trade off; a vertical line 
B) permanent trade off; a vertical line 
C) no permanent trade off; undetermined 
D) permanent trade off; undetermined

In the Self-Correction and the Long-Run Phillips Curve, at Point