The curve that shows the relationship between inflation and unemployment when the economy is at full employment is the
A) short-run Phillips curve.
B) long-run Phillips curve.
C) long-run Okun's curve.
D) aggregate demand curve.
E) aggregate supply curve.

Question

Quizplus · Accepted Answer

The long-run Phillips curve shows that there is no trade-off between inflation and unemployment in the long run when the economy is at its natural rate of unemployment or full employment. This is because there are no more available resources to be utilized, and any attempt to reduce unemployment through expansionary policies would only result in higher inflation.

The Curve That Shows the Relationship Between Inflation and Unemployment