The fact that the average unemployment rate during the 1950s and early 1960s was roughly the same as the average unemployment rate during the late 1960s and 1970s, which was roughly the same as the average unemployment rate during the 1980s and 1990s, shows that
A)there is not even a short-run tradeoff between unemployment and inflation.
B)it is also possible for there to be a long-run tradeoff between inflation and unemployment.
C)there are many issues that the AD-IA analysis cannot address.
D)it is possible to have high inflation monetary policy without long-run pain.
E)there is no long-run tradeoff between inflation and unemployment.

Question

Quizplus · Accepted Answer

The fact that the average unemployment rate remained roughly the same across different time periods suggests that there is no long-run tradeoff between inflation and unemployment. This is in line with the idea of the natural rate of unemployment, which is the rate of unemployment that exists when the economy is at potential output, and which is not affected by changes in the inflation rate. This means that attempts to reduce unemployment below the natural rate by using expansionary monetary or fiscal policies will only result in higher inflation in the long run, without providing any lasting benefits to the labor market.

The Fact That the Average Unemployment Rate During the 1950s