The Long-Run Phillips Curve Shows That in the Long Run

question 303

Multiple Choice

The long-run Phillips curve shows that in the long run, policymakers can

• A) lower inflation without increasing unemployment.
• B) lower unemployment if they are willing to accept more inflation forever.
• C) choose the unemployment rate but not the inflation rate.
• D) lower inflation if they are willing to accept higher unemployment forever.

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Definitions:

Phillips Curve

An economic concept depicting an inverse relationship between the rate of unemployment and the rate of inflation in an economy over time.

Friedman and Phelps

Refers to the contributions of Milton Friedman and Edmund Phelps in economics, particularly their work on the natural rate of unemployment and the expectations-augmented Phillips Curve, disputing the long-term trade-off between inflation and unemployment.

Government Expenditures

The total amount of money spent by the government on goods, services, and public projects.

Short-run Phillips Curve

A graphical representation showing an inverse relationship between the rate of inflation and the rate of unemployment in the short term.