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Author Question: In the long run, what is the tradeoff between inflation and unemployment? Explain your answer using ... (Read 94 times)

scienceeasy

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on: Jun 29, 2018
In the long run, what is the tradeoff between inflation and unemployment? Explain your answer using Phillips curve analysis.
 
  What will be an ideal response?

Question 2

Suppose the government wants to reduce illegal importation of exotic animals used as pets and tries to achieve this goal by interrupting the supply of illegally imported exotic animals.
 
  If the demand for these animals is highly inelastic, this government effort will result in A) a small reduction in the quantity of exotic pets demanded.
  B) a large reduction in the quantity of exotic pets demanded.
  C) no change in the quantity of exotic pets demanded.
  D) an increase in the quantity of exotic pets demanded.


Ksh22

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Reply #1 on: Jun 29, 2018
Answer to Question 1

In the long run, there is no tradeoff between inflation and unemployment. In particular, in the long run, changes in the inflation rate have no effect on the unemployment rate. The long-run Phillips curve is vertical, thereby showing that in the long run, any inflation rate can occur but in the long run the unemployment rate will equal the natural unemployment rate.

Answer to Question 2

A


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