The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on which of the following?
A)the natural rate of unemployment and monetary growth
B)the natural rate of unemployment, but not monetary growth
C)monetary growth, but not the natural rate of unemployment
D)neither monetary growth nor the natural rate of unemployment

Question

Quizplus · Accepted Answer

The position of the long-run Phillips curve and the long-run aggregate supply curve both depend on the natural rate of unemployment, which is the rate that exists when the labor market is in equilibrium and there is no cyclical unemployment. These curves do not depend on monetary growth, which only affects the nominal variables in the economy, such as inflation and nominal GDP, but not the real variables, such as output and employment. Therefore, choices A, C, and D are incorrect.

The Position of the Long-Run Phillips Curve and the Long-Run