Under what condition will the Phillips curve be vertical in the long run at the natural rate of unemployment?

Show Answers

When the long-run aggregate demand curve is perfectly elastic at the natural inflation rateWhen the long-run aggregate demand curve is vertical at the economy's potential outputWhen the long-run aggregate demand curve is perfectly inelastic at the natural inflation rateWhen the long-run aggregate supply curve is flat at the natural inflation rateNone of the above

Explanation

The Phillips curve becomes vertical in the long run at the natural rate of unemployment because, at this point, the long-run aggregate demand curve is vertical at potential GDP (the economy's full employment output). This reflects that inflation does not affect unemployment in the long term, as the economy operates at its natural rate.