long-run Phillips curve

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A curve depicting a long-run relation between inflation and unemployment. This is drawn adopting the assumption that the appropriate short-term Phillips curve is that augmented for inflation, and assuming that at each point on the long-run Phillips curve actual and expected inflation are equal. If models featuring a non-accelerating inflation rate of unemployment (NAIRU) are correct, the long-run Phillips curve is a vertical line at the NAIRU. If such models are not correct, there could be a non-vertical long-run Phillips curve, which while it was steeper than the short-run curves, was still not actually vertical. This would leave some scope for a long-run trade-off between inflation and unemployment, which does not exist if the long-run Phillips curve is vertical.

Subjects: Economics.

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