Suppose the natural unemployment rate is 4 percent and the expected inflation rate is 6 percent. In the figure below, illustrate the long-run Phillips curve

What does the long-run Phillips curve reveal abut the long-run tradeoff between inflation and unemployment?


The long-run Phillips curve is illustrated in the above figure. It is vertical at the natural unemployment rate. The fact that the long-run Phillips curve is vertical means that in the long run there is no tradeoff between inflation and unemployment. In other words, in the long run higher inflation does not decrease unemployment nor does low inflation increase unemployment.

Economics

You might also like to view...

A monopolistically competitive industry that earns economic profits in the short run will

A) experience a rise in demand in the long run. B) experience the entry of new rival firms into the industry in the long run. C) experience the exit of existing firms out of the industry in the long run. D) continue to earn economic profits in the long run.

Economics

Refer to the graph below. A minimum wage in this labor market would



a. cause some layoffs as the quantity demanded for workers falls.
b. create some unemployment as a result of an increase in the quantity supplied of labor looking for a job.
c. create a surplus of labor in this market.
d. All of the above.

Economics

Discouraged workers are included in the

a. labor force category. b. unemployed category. c. not in the labor force category. d. employed category.

Economics

Public goods, when left to the private market will be:

A. oversupplied. B. overconsumed. C. underconsumed. D. undersupplied.

Economics