What is true along the long-run Phillips curve? A. A labor shortage exists. B. A tradeoff exists between the inflation rate and the unemployment rate. C. The economy is at full employment. D. The inflation rate equals the expected inflation rate and any unemployment rate is possible. **Incorrect Answer Notification:**The graph illustrates the Long-Run Phillips Curve (LRPC). **Graph Description:**- **Title:** Inflation rate (percent per year) vs. Unemployment rate (percent of labor force)- **X-Axis:** Represents the unemployment rate as a percentage of the labor force, ranging from 0.0% to 12.0%.- **Y-Axis:** Represents the inflation rate as a percentage per year, ranging from 0% to 20%.- **LRPC Line:** A vertical blue line labeled "LRPC" at an unemployment rate of 5.0%, indicating the natural rate of unemployment in the long run.This graph is used to illustrate the concept that in the long run, there is no trade-off between inflation and unemployment, meaning that the unemployment rate remains constant regardless of the inflation rate.

After a short run deviation there will be an adjustment in prices and the curve moves back towards…

Answered: What is true along the long-run…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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What is true along the long-run Phillips curve? A. A labor shortage exists. B. A tradeoff exists between the inflation rate and the unemployment rate. C. The economy is at full employment. D. The inflation rate equals the expected inflation rate and any unemployment rate is possible.

**Incorrect Answer Notification:**

The graph illustrates the Long-Run Phillips Curve (LRPC).

**Graph Description:**

- **Title:** Inflation rate (percent per year) vs. Unemployment rate (percent of labor force)
- **X-Axis:** Represents the unemployment rate as a percentage of the labor force, ranging from 0.0% to 12.0%.
- **Y-Axis:** Represents the inflation rate as a percentage per year, ranging from 0% to 20%.
- **LRPC Line:** A vertical blue line labeled "LRPC" at an unemployment rate of 5.0%, indicating the natural rate of unemployment in the long run.

This graph is used to illustrate the concept that in the long run, there is no trade-off between inflation and unemployment, meaning that the unemployment rate remains constant regardless of the inflation rate.

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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