If inflationary expectations are stable and there is no current inflation, the short-run Phillips curve will intersect the long-run Phillips curve at:
A)a 0 percent unemployment rate.
B)a 2 percent unemployment rate.
C)a 4 percent unemployment rate.
D)the natural rate of unemployment.

Question

If inflationary expectations are stable and there is no current inflation, the short-run Phillips curve will intersect the long-run Phillips curve at:
A)​a 0 percent unemployment rate.
B)​a 2 percent unemployment rate.
C)​a 4 percent unemployment rate.
D)​the natural rate of unemployment.

Quizplus · Accepted Answer

When inflationary expectations are stable and there is no current inflation, the short-run Phillips curve will intersect the long-run Phillips curve at the natural rate of unemployment. This is the level of unemployment at which there is no cyclical unemployment and the economy is operating at its potential output.

If Inflationary Expectations Are Stable and There Is No Current