In the long run, the Phillips curve is a ________ at ________.

Question

Quizplus · Accepted Answer

In the long run, the Phillips curve becomes a vertical line because in the long run, changes in inflation rate do not affect the natural rate of unemployment, which is determined by structural factors such as demographics, technology, and institutions. Therefore, in the long run, any attempt by policymakers to reduce unemployment by increasing inflation will only lead to higher inflation but not a lower unemployment rate. Thus, the long-run Phillips curve meets the vertical axis at the natural rate of unemployment.

In the Long Run, the Phillips Curve Is a ________