The Phillips curve represents a
A) short-run relationship but not a long-run one.
B) trade-off policy makers can exploit in the long-run.
C) a long-run relationship but not a short-run one.
D) stable long-run trade-off, exploitable by government policy.
E) both a long-run and a short-run relationship.

Question

Quizplus · Accepted Answer

The Phillips curve describes a short-run trade-off between inflation and unemployment. However, this relationship tends to break down in the long run as expectations adjust and the economy returns to its natural rate of unemployment. Therefore, the Phillips curve represents a short-run relationship but not a long-run one.

The Phillips Curve Represents a