The Phillips curve analysis described in Chapter 14 implies that there is a negative tradeoff between inflation and unemployment in:
A) both the short run and long run.
B) in the short run only.
C) in the long run only.
D) in neither the short run nor the long run.

Question

Quizplus · Accepted Answer

The Phillips curve analysis shows the negative tradeoff between inflation and unemployment in the short run only. In the long run, this relationship is not sustainable as inflation expectations adjust to the new rate of inflation, bringing the economy back to its natural rate of unemployment.

The Phillips Curve Analysis Described in Chapter 14 Implies That