The pattern of employment and inflation observed during the 1970s appeared to confirm the view of Phelps and Friedman that
A) the Phillips curve was upward sloping, not downward sloping as first thought.
B) there was no trade-off between inflation and unemployment in the long run.
C) the expected trade-offs did not occur, meaning that policy to lower unemployment rates would not cause inflation.
D) the aggregate supply curve actually sloped downward because price levels fell when real GDP rose.

Question

Quizplus · Accepted Answer

The pattern of employment and inflation observed during the 1970s confirmed the view of Phelps and Friedman that there was no trade-off between inflation and unemployment in the long run. This contradicted the previous belief that there was a stable Phillips curve indicating that there was a negative relationship between inflation and unemployment.

The Pattern of Employment and Inflation Observed During the 1970s