If the long-run Phillips curve is vertical,expansionary monetary and fiscal policies that attempt to reduce the unemployment rate below its natural rate
A) lower inflationary expectations.
B) eliminate the wage-price spiral.
C) lead to accelerating rates of inflation.
D) shift the short-run Phillips curve downward to the left.
E) reduce the consumer price index.

Question

Quizplus · Accepted Answer

Since the long-run Phillips curve is vertical, there is no trade-off between inflation and unemployment in the long run. Therefore, attempting to reduce the unemployment rate below its natural rate through expansionary monetary and fiscal policies will only lead to accelerating rates of inflation.

If the Long-Run Phillips Curve Is Vertical,expansionary Monetary and Fiscal