Contraction consistent with:

A vertical Phillips curve suggests no trade-off between inflation and unemployment, indicating that changes in inflation do not affect unemployment rates. This view aligns with the long-run Phillips curve, which posits that in the long run, the economy returns to its natural rate of unemployment regardless of inflation. However, this does not accurately represent the short-run dynamics illustrated by the short-run Phillips curve.

An upward sloping Phillips curve would imply that higher inflation leads to higher unemployment, which contradicts the empirical observations of the short-run relationship. In fact, the short-run Phillips curve is characterized by falling unemployment with rising inflation, demonstrating that the two variables exhibit an inverse relationship in the short run.