How can the Phillips Curve be used to analyze both short-run and long-run trade-offs between inflation and unemployment in an economy?
Answer 1
Pamela Owens MD
The Phillips Curve illustrates the inverse relationship between inflation and unemployment in the short run, suggesting that lower unemployment comes with higher inflation. In the long run, the curve becomes vertical, indicating no trade-off as inflation expectations adjust, aligning unemployment with its natural rate.
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