The long-run Phillips curve is ____ at the ____?
Correct answer: D. vertical equilibrium rate of unemployment
- A. horizontal, natural rate of inflation
- B. horizontal natural rate of unemployment
- C. vertical natural rate of inflation
- D. vertical equilibrium rate of unemployment
Explanation
In the long run, unemployment returns to its natural or equilibrium rate regardless of the inflation rate, so the Phillips curve is vertical. Option d uses equilibrium rate of unemployment as the equivalent term.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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