For many government decision makers, the original Phillips curve implied
A)a trade-off between lowering unemployment at the cost of higher inflation or lowering inflation at the cost of higher unemployment
B)that active stabilization policy will always work if applied correctly
C)that severe recessions were a thing of the past, as unemployment could easily adjust to its natural rate
D)that the natural rate of unemployment can be lowered by expansionary monetary policy
E)all of the above

Question

Quizplus · Accepted Answer

The original Phillips curve suggested a trade-off between lowering unemployment at the cost of higher inflation or lowering inflation at the cost of higher unemployment. This led many government decision makers to believe that they could use monetary or fiscal policy to manipulate the economy and achieve desirable levels of employment and inflation. However, this theory has been challenged in recent years, as policymakers have realized that the relationship between unemployment and inflation is complex and may not always hold true.

For Many Government Decision Makers, the Original Phillips Curve Implied