The long-run Phillips curve: depicts the negative relationship between the unemployment rate and the inflation rate. explains how expansionary policies can affect an economy, while contractionary policies have little effect. shows the positive relationship between the unemployment rate and the inflation rate. suggests that policies have little effect on the natural rate of unemployment in the long run.
Added by Leslie P.
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The long-run Phillips curve is a concept in economics that represents the relationship between inflation and unemployment. Show more…
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Suppose the government misjudges the natural rate of unemployment to be much lower than it actually is, and thus undertakes expansionary fiscal and monetary policies to try to achieve the lower rate. Use the concept of the short-run Phillips Curve to explain why these policies might at first succeed. Use the concept of the long-run Phillips Curve to explain the long-run outcome of these policies.
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If both the short-run and long-run Phillips curves are vertical, what will be the effect on the inflation rate and the unemployment rate of an expansionary monetary policy? Use a Phillips curve graph to illustrate your answer.
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