At the point where actual inflation is equal to expected inflation

Question

Quizplus · Accepted Answer

The point at which actual inflation is equal to expected inflation is known as the natural rate of unemployment or the non-accelerating inflation rate of unemployment (NAIRU). At this point, the short-run Phillips curve intersects the long-run Phillips curve, indicating that the economy is in equilibrium. The long-run Phillips curve is a vertical line that represents the natural rate of unemployment, while the short-run Phillips curve is a downward sloping curve that shows the relationship between inflation and unemployment in the short run. Therefore, the correct answer is C, as the short-run Phillips curve intersects the long-run Phillips curve at the point where actual inflation is equal to expected inflation.

At the Point Where Actual Inflation Is Equal to Expected