The short-run Phillips Curve is _________, and the long-run Phillips Curve is ________.
A) downward sloping; vertical
B) downward sloping; horizontal
C) upward sloping; vertical
D) upward sloping; horizontal

Question

Quizplus · Accepted Answer

The short-run Phillips Curve shows an inverse relationship between inflation and unemployment, indicating a downward sloping curve. In the long-run, however, the Phillips Curve becomes vertical, indicating that there is no trade-off between inflation and unemployment in the long-run. This is because in the long-run, changes in aggregate demand will only affect the price level and not output or employment.

The Short-Run Phillips Curve Is _________, and the Long-Run Phillips