According to classical economists, if input prices adjust almost instantly to changes in output prices, how would the Phillips curve be characterized?

Multiple choice question for Aggregate Supply, Unemployment And Inflation. Select an option, then review the explanation below.

Explanation

Classical economic theory suggests that when input prices adjust very quickly to output price changes, the Phillips curve becomes vertical or nearly vertical. This implies that there is no trade-off between inflation and unemployment in the long run, as prices and wages adjust promptly, eliminating any short-run effects.

Practice related questions from the same subject.

1.How would eliminating income tax likely affect the total employment and the natural rate of unemployment?
2.Which type of economic policies aim to decrease unemployment by weakening union influence, implementing tax reductions, lowering unemployment benefits, and providing investment incentives?
3.At any given real wage, the equilibrium unemployment rate is calculated as the difference between which two factors?
4.What type of unemployment affects an individual who loses their job due to a decline in an industry?
5.What factor can cause the short-run Phillips curve to shift position?

According to classical economists, if input prices adjust almost instantly to changes in output prices, how would the Phillips curve be characterized?

Explanation

More Aggregate Supply, Unemployment And Inflation MCQs