Question

What do most economists believe is the relationship between long run expectations of inflation, actual inflation, and the money supply growth?

Answer 1

Answer:

In the short run, the Phillips curve states that inflation and unemployment are inversely related. As inflation rises, unemployment decreases. But in the long run, the unemployment rate is fixed and will not be affected by the inflation rate. In the long run a higher inflation rate does not affect the unemployment rate (vertical line).