If wages and prices become extremely flexible ________.
A)there is no trade off between inflation and unemployment
B)unemployment can hardly deviate from the natural rate
C)it becomes very difficult to differentiate the short-run from the long-run Phillips curve
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

If wages and prices become extremely flexible, there would be no trade-off between inflation and unemployment, and the economy would quickly adjust to changes in supply and demand. As a result, unemployment can hardly deviate from the natural rate, and it becomes difficult to differentiate the short-run from the long-run Phillips curve. Therefore, all of the above statements are true.

If Wages and Prices Become Extremely Flexible ________