For many years country A has had a lower unemployment rate than country B.According to the long-run Phillips curve which of the following could explain this? Country A has
A)maintained a higher money supply growth rate.
B)maintained a lower money supply growth rate.
C)a higher minimum wage than country B.
D)a lower minimum wage than country B.

Question

Quizplus · Accepted Answer

According to the long-run Phillips curve, there is no trade-off between inflation and unemployment in the long-run. Therefore, factors such as changes in money supply growth rate are not relevant. Instead, the curve suggests that in the long-run, the natural rate of unemployment is related to structural factors such as the level of education, the flexibility of the labor market, and the level of productivity. A possible explanation for country A having a lower unemployment rate than country B is that country A has lower minimum wage rates, which can make it easier for employers to hire workers and maintain lower unemployment rates.

For Many Years Country a Has Had a Lower Unemployment