Asked by Dharmesh Kharel on May 02, 2024
Verified
The long-run Phillips curve is consistent with monetary neutrality implied by the classical dichotomy.
Monetary Neutrality
The concept that changes in the money supply only affect nominal variables, like prices, not real variables like output or employment in the long term.
Classical Dichotomy
The theoretical separation of nominal and real variables
- Gain an insight into the theory of monetary neutrality and its enduring consequences.
- Acquire knowledge about the value of the classical dichotomy and its pertinence to current economic policies.
Verified Answer
VS
Valencia SimoneMay 08, 2024
Final Answer :
True
Explanation :
The long-run Phillips curve is vertical, indicating that in the long run, there is no trade-off between inflation and unemployment. This is consistent with the concept of monetary neutrality implied by the classical dichotomy, which suggests that changes in the money supply only affect nominal variables (like prices) and not real variables (like unemployment) in the long run.
Learning Objectives
- Gain an insight into the theory of monetary neutrality and its enduring consequences.
- Acquire knowledge about the value of the classical dichotomy and its pertinence to current economic policies.
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