If the Phillips Curve exists in reality, what dilemma does this create for fiscal and monetary policies? Explain.

Question

Quizplus · Accepted Answer

The Answer is The dilemma is that an expansionary fiscal and monetary policy aimed at reducing unemployment may cause inflation, and vice versa for policies aimed at reducing inflation.If there truly is a trade-off, then successful elimination of unemployment cannot be accomplished without the creation of inflation; likewise, stable prices occur only in the presence of some unemployment.

If the Phillips Curve Exists in Reality, What Dilemma Does