A policy intended to reduce unemployment by taking advantage of a tradeoff between inflation and unemployment leads to
A)both higher inflation and higher unemployment in the long run.
B)higher inflation and no change in unemployment in the long run.
C)the same inflation rate and lower unemployment in the long run.
D)higher inflation and lower unemployment in the long run

Question

Quizplus · Accepted Answer

In the long run, the Phillips Curve suggests that there is no tradeoff between inflation and unemployment. Attempts to reduce unemployment below its natural rate can lead to higher inflation, but unemployment will return to its natural rate, resulting in higher inflation with no change in long-term unemployment.

A Policy Intended to Reduce Unemployment by Taking Advantage of a Tradeoff