The Importance of the Vertical Long-Run Phillips Curve Hypothesis Is

question 49

Multiple Choice

The importance of the vertical long-run Phillips curve hypothesis is its implication that

• A) any increase in the rate of inflation caused by monetary and fiscal policies designed to reduce unemployment is temporary.
• B) price controls can do no good.
• C) monetary and fiscal policies designed to reduce unemployment below its natural rate do so temporarily.
• D) to solve the inflation-unemployment problem, labor unions must recognize that their wage gains are eroded by inflation.
• E) expansionary monetary or fiscal policy shifts the long-run Phillips curve to the left.

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