The long-run Phillips curve would shift left if
A)the money supply increased or if the minimum wage was reduced.
B)the money supply increased but not if the minimum wage was reduced.
C)the minimum wage was reduced but not if the money supply increased.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The long-run Phillips curve is vertical, indicating that there is no trade-off between inflation and unemployment. In the long run, changes in the money supply or other monetary policy variables do not affect the unemployment rate. Therefore, the only factor that can shift the long-run Phillips curve is a change in the natural rate of unemployment, which can be caused by structural factors such as changes in the minimum wage. Therefore, if the minimum wage was reduced, the long-run Phillips curve would shift left, indicating a lower natural rate of unemployment.

The Long-Run Phillips Curve Would Shift Left If