The Long-Run Phillips Curve

question 190

Multiple Choice

The long-run Phillips curve

• A) is downward sloping, indicating a tradeoff between unemployment and inflation.
• B) shifts to the right when the expected inflation rate increases.
• C) shows no tradeoff between inflation and unemployment; that is, any inflation rate in the long run can be consistent with the natural rate of unemployment.
• D) is upward sloping, showing that higher rates of unemployment are associated with higher rates of inflation.

---

Definitions:

Equivalent Variation

An economic measure of the difference in income that a consumer would require to reach the same level of utility before and after a price change.

Income

The sum of funds earned, often periodically, from employment or investment returns.

Demand Function

A mathematical equation that describes the relationship between the quantity of a good demanded and its price, along with other factors like income and price of related goods.

Consumer's Surplus

The difference between the total amount that consumers are willing and able to pay for a good or service and the total amount that they actually do pay.