Which of the following correctly explains the expectations-augmented Phillips Curve?
1
It accounts for the adaptive expectations of inflation, showing a trade-off between inflation and unemployment in both short and long run.
2
It incorporates inflationary expectations, shifting the short-run Phillips Curve up or down based on these expectations.
3
It suggests that there is a permanent trade-off between inflation and unemployment.
4
It demonstrates that the long-run Phillips Curve is horizontal, indicating a constant inflation rate.