Describe the short run trade-off between inflation and unemployment. Why is there not a long-run trade-off? How long do you think the short-run lasts? (Or do you believe there is a trade-off at all – many economists don’t. Why?
In the short-run, the trade-off between inflation and unemployment is that when there is lower unemployment, there is a higher aggregate demand for output which in turn raises the price index and the interest rate. When unemployment is high, the output is lower and that lowers the price index and the interest rate.
I think there is not a long-run trade-off because in the long-run, our unemployment numbers generally stay at about the same rate. Inflation happens over the long-run even if in the short-run there is deflation. Over years, inflation is bound to happen.
Even when there are times of high unemployment and low interest rates, the economy will eventually even back out and unemployment will go back down to its natural rate and interest rates will go back up.
My Journey into Macroeconomics 