Multiple choice

Assertion (A) : According o Milton Friedman, the slope of the long-run Phillips curve is vertical. Reason (R) : The expectations about future inflation are the basic cause of the non-existence of the trade-off between inflation and unemployment in the long-run.

  1. Both (A) and (K) are true and (R) is not the correct reason of (A)

  2. Both (A) and (R) are true, but (R) is the correct reason of (A)

  3. Both (A) and (R) are false

  4. (A) is true, but (R) is false
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Milton Friedman argued that the long-run Phillips curve is vertical at the natural rate of unemployment. In the long run, inflation expectations fully adjust to actual inflation, eliminating any permanent trade-off between inflation and unemployment. The reason correctly explains that expectations cause this non-existence of trade-off.

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