If employees and employers always accurately predict inflation, what is the shape of the Phillips curve?

Question

Quizplus · Accepted Answer

If employees and employers always accurately predict inflation, there would be no trade-off between inflation and unemployment, and the Phillips curve would be vertical both in the short run and in the long run. This is because in the long run, nominal wages and prices adjust to changes in inflation, and the natural rate of unemployment (the rate consistent with no systematic inflation or deflation) is restored. Therefore, any attempt to reduce unemployment below that natural rate through expansionary policies would be futile and result only in higher inflation.

If Employees and Employers Always Accurately Predict Inflation, What Is