Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
A→B→C→D
B
C→A→B→D
C
A→C→B→D
D
B→A→C→D
Understanding the Answer
Let's break down why this is correct
Answer
The Long Run Phillips Curve shows that there is no lasting trade-off between inflation and unemployment. First, the economy eventually reaches what is called the natural rate of unemployment, which is the level of unemployment that exists when the economy is healthy. Once this happens, people's expectations about inflation stabilize because they realize that high inflation does not lead to lower unemployment in the long run. As these expectations become stable, the short-run Phillips Curve shifts, reflecting that policymakers cannot consistently lower unemployment by accepting higher inflation. Ultimately, this leads to the understanding that in the long run, there is no trade-off between inflation and unemployment; they are influenced by different factors.
Detailed Explanation
First, the economy reaches the natural rate of unemployment. Other options are incorrect because This order suggests that the short-run Phillips Curve shifts before the economy reaches natural unemployment; This option places the short-run shift before stabilizing expectations.
Key Concepts
Long Run Phillips Curve
Natural Rate of Unemployment
Short Run Phillips Curve
Topic
Long Run Phillips Curve
Difficulty
medium level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.