Those who hold that the downward-sloping Phillips curve is a short-run relationship argue that it is futile for government to try to reduce the unemployment rate below
A) zero.
B) its natural rate.
C) the Phillips curve.
D) the levels mandated by the Kennedy-Johnson guidelines.
E) the rate of labor productivity.

Question

Quizplus · Accepted Answer

According to the theory of the downward-sloping Phillips curve, a decrease in unemployment below its natural rate leads to an increase in inflationary pressures, causing wages and prices to rise. Therefore, policymakers who wish to reduce unemployment to below its natural rate will have to accept higher inflation. Since this relationship is believed to be a short-run phenomenon that becomes irrelevant in the long run, attempts to keep unemployment below its natural rate are futile, and the economy will return to its natural rate of unemployment in the long run. Thus, the best choice is B, as policymakers should aim to reduce unemployment to its natural rate, rather than trying to push it below that level.

Those Who Hold That the Downward-Sloping Phillips Curve Is a Short-Run