There is no long-run trade-off between inflation and output because:
A)monetary policy makers will have adequately controlled unexpected inflation in the long run.
B)fiscal policy makers will have adequately controlled unexpected inflation in the long run.
C)in the short run, output and unemployment are not related.
D)allowing inflation doesn't lead to sustainably higher output.

Question

Quizplus · Accepted Answer

Allowing inflation does not lead to sustainably higher output in the long run. While inflation may stimulate output in the short run by temporarily reducing unemployment and increasing demand, in the long run it will only lead to higher prices and reduced purchasing power. Therefore, there is no long-run trade-off between inflation and output.

There Is No Long-Run Trade-Off Between Inflation and Output Because