Question

The unemployment rate on the long-run Phillips curve will:

a) Rise above the natural rate of unemployment

b) Be the natural rate of unemployment

c) Fall below the natural rate of unemployment

d) Show significant fluctuations above and below the natural rate of unemployment

Answer 1

The unemployment rate on the long-run Phillips curve will be the natural rate of unemployment.

Step-by-step explanation:

The unemployment rate on the long-run Phillips curve will be the natural rate of unemployment. The natural rate of unemployment is the level of unemployment that exists when the economy is at full employment and there is no cyclical unemployment. It represents the equilibrium level of unemployment consistent with stable prices and is determined by structural and frictional factors.