Which of the following is downward-sloping? a.both the long-run Phillips curve and the long-run aggregate-supply curve b.neither the long-run Phillips curve nor the long-run aggregate-supply curve c.the short-run Phillips curve, but not the long-run aggregate-supply curve d.the long-run Phillips curve, but not the long-run aggregate-supply curve

Long run Phillips curve is vertical or upward sloping, which determines that there is no relation between long-run unemployment and inflation. On the other hand, the short-run Phillips curve is downward sloping as it indicates the negative relation between inflation and the unemployment rate in the short run. On the other hand, the long-run supply curve is also vertical ie there is no relationship between the price level and output rather the output is determined by productivity, etc. But the short-run aggregate supply curve is upward sloping. Hence only the short-run Phillips curve is downward sloping. So given the above options, options B and C are correct as the long-run Phillips curve and long-run aggregate supply curve are both vertical while the short-run Phillips curve is downward sloping. If only one needs to be chosen, then option C should be preferred because it indicates at least one curve as downward sloping.

Answered: Which of the following is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following is downward-sloping?

	a.	both the long-run Phillips curve and the long-run aggregate-supply curve
	b.	neither the long-run Phillips curve nor the long-run aggregate-supply curve
	c.	the short-run Phillips curve, but not the long-run aggregate-supply curve
	d.	the long-run Phillips curve, but not the long-run aggregate-supply curve

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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