Asked by Giansa Viola on Jun 26, 2024

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Some economists believe that in the long run,the unemployment rate is independent of the inflation rate and so the Phillips curve becomes a vertical line.

Long Run

A period in economics where all inputs can be adjusted, and companies can change all factors of production.

Phillips Curve

An economic model suggesting an inverse relationship between rates of unemployment and corresponding rates of inflation.

Unemployment Rate

The percentage of the labor force that is jobless and actively seeking employment within an economy.

  • Attain an understanding of the repercussions of the Phillips Curve, with an emphasis on differentiating its transient and enduring aspects.
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LANGER SWANEPOELJun 28, 2024
Final Answer :
True
Explanation :
This is the concept of the vertical long-run Philips curve, which suggests that there is no trade-off between inflation and unemployment in the long run. Instead, the only factor that affects the unemployment rate is the natural rate of unemployment, which is determined by non-monetary factors such as demographics, technology, and labor market institutions. Therefore, changes in the inflation rate do not have a long-term impact on the unemployment rate. However, this does not mean that there is no short-term trade-off between inflation and unemployment, which is captured by the downward-sloping short-run Phillips curve.