Critics of the Phillips curve argue that in the long run
A) there is a trade-off between unemployment and inflation.
B) for any given unemployment level there is a corresponding inflation rate to which the economy will automatically revert.
C) employees are not able to anticipate future rates of inflation, and therefore unemployment can always be reduced by inflating the economy.
D) there is no trade-off between inflation and unemployment because workers' expectations adjust to any systematic attempts to reduce unemployment below the natural rate.

Question

Quizplus · Accepted Answer

Critics of the Phillips curve argue that in the long run, workers' expectations adjust to any systematic attempts to reduce unemployment below the natural rate. As a result, there is no trade-off between inflation and unemployment. This view is supported by the concept of the natural rate of unemployment, which is the rate of unemployment that exists when the labor market is in equilibrium and there is no cyclical unemployment. Any attempt to reduce unemployment below the natural rate will result in an increase in inflation, as workers demand higher wages to compensate for higher prices. Therefore, the Phillips curve is only applicable in the short run, and there is no long-run trade-off between inflation and unemployment.

Critics of the Phillips Curve Argue That in the Long