Once economists take into consideration changes in the expected inflation rate and supply shocks,the Phillips curve
A) only remains useful when explaining the long-run trade-off between unemployment and inflation.
B) remains a useful tool for explaining the short-run trade-off between unemployment and inflation.
C) is no longer a useful tool for explaining any trade-off between unemployment and inflation.
D) accurately explains the short-run and long-run trade-offs between unemployment and inflation.

Question

Quizplus · Accepted Answer

Once economists incorporate changes in the expected inflation rate and supply shocks, the Phillips curve remains a useful tool for explaining the short-run trade-off between unemployment and inflation, but is less useful for explaining the long-run trade-off.

Once Economists Take into Consideration Changes in the Expected Inflation