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In the short run, sticky prices create an inverse relationship between unemployment and inflation. In the long run, flexible prices lead to a vertical Phillips
In the short run, sticky prices create an inverse relationship between unemployment and inflation. In the long run, flexible prices lead to a vertical Phillips curve, indicating no sustained connection. Temporary stimulus boosts demand, reducing unemployment in the short run. However, rising wages restore the natural rate of unemployment in the long run. Long-term focus aids policymakers in implementing sustainable policies, fostering economic stability and growth
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