Considering a model of rational expectation, the Phillip Curve is flat in the long run

The correct answer is True.

Reason: According to the model of rational expectation, the shape of the Phillip Curve is a straight vertical line in the long run which explains that there is no long-lasting or enduring trade-off between inflation and unemployment in the long horizon. If the increase in inflation is high, then there is a very small change or no change in the level of unemployment in the long run.

The rational expectations mean the best utilization of information takes place to make the decisions and an individual will remind some past experiences to make a decision.

The Phillip Curve is a concept in economics that is created by A.W. Phillips and this explains the relation of inflation and unemployment. The relation is stable and inverse in nature. The Phillip curve in the short run shows that inflation brings growth in the economy and this leads to an increase in jobs and reduction in unemployment.

So, the shape of the Phillip Curve on the basis of rational expectation is flat or straight in the long run.