Question: 5. At a given point in time, there is a downward-sloping relationship between unemployment and inflation known as the short-run Phillips curve. This curve is

5. At a given point in time, there is a downward-sloping relationship between unemployment and inflation known as the short-run Phillips curve. This curve is shifted by changes in the expected rate of inflation. The long-run Phillips curve, which shows the relationship between unemployment and inflation once expectations have had time to adjust, is vertical. It defines the non-accelerating inflation rate of unemployment, or NAIRU, which is equal to the natural rate of unemployment. Stagflation, a combination of high unemployment and high inflation, reflects an upward shift of the short-run Phillips curve.

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