The fact that the Phillips curve broke down during the 1970s means that aggregate demand has no effect on inflation.

Question

Quizplus · Accepted Answer

The breakdown of the Phillips curve in the 1970s means that the relationship between unemployment and inflation is no longer as strong, but it does not mean that aggregate demand has no effect on inflation. Other factors such as supply shocks and inflation expectations also play a role in determining inflation.

The Fact That the Phillips Curve Broke Down During the 1970s