At points along the long-run Phillips curve:

Question

Quizplus · Accepted Answer

Points along the long-run Phillips curve represent the natural rate of unemployment, which is the rate of unemployment that occurs when the economy is in a state of equilibrium and not affected by any temporary shocks. At this rate of unemployment, the expected inflation rate equals the actual inflation rate, which is the inflation rate consistent with price stability. Therefore, the correct choice is D, as the economy is at full employment (A) and expected inflation equals actual inflation (C) at points along the long-run Phillips curve.

At Points Along the Long-Run Phillips Curve