Answered

At which point does the long-
run Phillips curve exist?
A. the natural rate of unemployment
B. the optimal rate of employment
C. the natural rate of inflation
D. the optimal interest rate

Verified Answer :

GinnyAnswer

Final answer:

The long-run Phillips curve is at the natural rate of unemployment, showing no trade-off between inflation and unemployment. NAIRU theory explains the relationship between economic policies, unemployment rates, and inflation in the long run.


Explanation:

The long-run Phillips curve exists at the natural rate of unemployment. In the long run, the Phillips curve will be vertical, showing no trade-off between inflation and unemployment.

Milton Friedman and Edmund Phelps developed the natural rate of unemployment theory, which explains how economic policies affect unemployment and inflation rates.

NAIRU theory states that in the long run, attempts to change unemployment rates will only result in temporary effects as the economy adjusts to the natural rate.


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