How was the Phillips curve for most of the 1990s and why?
A) It was fairly far to the right partly because of lower inflation expectations.
B) It was fairly far to the left partly because of lower inflation expectations.
C) It was fairly far to the right partly because of adverse supply shocks.
D) It was fairly far to the left partly because of adverse supply shocks.

Question

Quizplus · Accepted Answer

The Phillips curve was fairly far to the left partly because of lower inflation expectations. This was due to the success of central banks in controlling inflation in the 1980s, which led to lower inflation expectations among households and businesses. As a result, the tradeoff between inflation and unemployment became less significant and the Phillips curve shifted leftward.

How Was the Phillips Curve for Most of the 1990s