The relationship shown by the Phillips curve,which implies a tradeoff between inflation and unemployment rates,is a long-run phenomenon.

Question

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The Phillips curve relationship between inflation and unemployment rates is a short-run phenomenon, as in the long run, there is no tradeoff between inflation and unemployment. In the long run, the Phillips curve is vertical, implying that changes in the inflation rate do not affect the unemployment rate.

The Relationship Shown by the Phillips Curve,which Implies a Tradeoff