Answer to Question #98422 in Macroeconomics for Tiffany

Question

3. There is debate concerning both monetary and fiscal policy. You’ll examine each separately, then together.
d. The Phillips curve shows an important trade-off faced by economic policymakers. This trade-off was used to point out the legitimacy of government intervention in the economy for many years.
(iii) What is the currently accepted belief about the Phillips curve? Hint: This question has to do with the long run versus the short run.

Answer 1

According to most economists in the short-run there exist a trade-off between higher inflation and unemployment. The currently accepted belief about the Phillips curve is that unemployment can persist in the long-run and if demand increases it will lower unemployment and increase inflation rate.