Country A's long-run Phillips curve is farther to the right than country B's. Country A and country B are identical in all other ways. In particular, they have the same money supply growth rates. In the long run as compared to country B country A will have
A)higher unemployment and higher inflation.
B)higher unemployment and the same rate of inflation.
C)lower unemployment and higher inflation.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The long-run Phillips curve being farther to the right for Country A indicates a higher natural rate of unemployment. Since both countries have the same money supply growth rates, they will have the same rate of inflation in the long run.

Country A's Long-Run Phillips Curve Is Farther to the Right