-An economy's natural unemployment rate is 4 percent. The table above gives some points on the economy's short-run Phillips curve. When the unemployment rate is 4 percent

Question

Quizplus · Accepted Answer

When the unemployment rate is at its natural rate (4 percent in this case), the actual inflation rate equals the expected inflation rate, and this point is where the short-run Phillips curve intersects the long-run Phillips curve. Therefore, if the inflation rate is 6 percent when the unemployment rate is 4 percent, it implies that this is the expected inflation rate as well, marking the intersection of the short-run and long-run Phillips curves.

-An Economy's Natural Unemployment Rate Is 4 Percent