The long-run Phillips curve at the natural rate of unemployment is analogous to the
A) short-run Phillips curve at the natural rate of unemployment.
B) long-run aggregate supply curve at potential national income.
C) short-run aggregate demand curve at potential national income.
D) long-run aggregate demand curve at each price level.
E) horizontal portion of the aggregate supply curve.

Question

Quizplus · Accepted Answer

The long-run Phillips curve at the natural rate of unemployment shows the relationship between inflation and unemployment in the long run, after all temporary shocks have dissipated and the economy has reached potential output. Similarly, the long-run aggregate supply curve also represents potential output and shows the relationship between the price level and the level of output in the long run. Therefore, choice B is the best answer.

The Long-Run Phillips Curve at the Natural Rate of Unemployment