If the economy is at the point where the short-run Phillips curve intersects the long-run Phillips curve, what are the values of unemployment and inflation?
A) Unemployment equals the natural rate, and expected inflation equals actual inflation.
B) Unemployment is above the natural rate, and expected inflation equals actual inflation.
C) Unemployment equals the natural rate, and expected inflation is lower than actual inflation.
D) Unemployment is below the natural rate, and inflation is greater than the expected rate.

Question

Quizplus · Accepted Answer

At the point where the short-run Phillips curve intersects the long-run Phillips curve, the economy has reached the natural rate of unemployment, and there is no tradeoff between inflation and unemployment. Therefore, unemployment equals the natural rate, and expected inflation equals actual inflation.

If the Economy Is at the Point Where the Short-Run