The analysis of Friedman and Phelps argues that any change in inflation that is expected has no impact on the unemployment rate.

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Friedman and Phelps argued that only unexpected inflation can temporarily lower unemployment, and that any expected inflation is already factored into wage negotiations and contracts, thus having no long-term effect on the unemployment rate. This concept is central to the natural rate of unemployment hypothesis.

The Analysis of Friedman and Phelps Argues That Any Change