Sia
Question
Statistics
Posted 10 months ago
In a model of the long-run Phillips curve (LRPC), what is the shape of the Phillips curve and where should it be placed?
Choose 1 answer:
(A) Vertical at the current rate of unemployment
(B) Vertical at full employment output
(c) Horizontal at the natural rate of inflation
(D) Vertical at the natural rate of unemployment
(E) Horizontal at the current rate of inflation
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Answer from Sia
Posted 10 months ago
Solution by Steps
step 1
To answer the question about the long-run Phillips curve (LRPC), we need to recall the economic theory behind the LRPC
step 2
The LRPC is theorized to be vertical because it represents the relationship between inflation and unemployment when the economy is at its natural rate of unemployment
step 3
The natural rate of unemployment is the rate at which the economy is considered to be at full employment, without cyclical or deficient-demand unemployment
step 4
Therefore, the LRPC is not affected by the rate of inflation, which implies that it is vertical at the natural rate of unemployment
Answer
D
Key Concept
Long-Run Phillips Curve (LRPC)
Explanation
The LRPC is vertical at the natural rate of unemployment, indicating no trade-off between inflation and unemployment in the long
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