The Friedman-Phelps critique of the Phillips curve focused on the observation that ________.
A)workers care primarily about nominal wages and therefore higher inflation would induce them to supply more labour
B)workers care primarily about nominal wages and therefore higher inflation would induce them to supply less labour
C)workers care primarily about real wages and therefore higher inflation would induce them to demand higher nominal wages which would result in higher aggregate output
D)workers care primarily about real wages and therefore higher inflation would induce them to demand higher nominal wages which would result in no increase in aggregate output

Question

Quizplus · Accepted Answer

The Friedman-Phelps critique argues that workers care about real wages, not nominal wages. Therefore, higher inflation leads them to demand higher nominal wages, which negates any potential increase in aggregate output, as the real wage remains unchanged.

The Friedman-Phelps Critique of the Phillips Curve Focused on the Observation