The simple Phillips curve model continues to perform well in many countries where three conditions are present. Which of the following is NOT one of the three conditions?
A) relatively few supply shocks
B) a stable natural rate of unemployment
C) relatively few demand shocks
D) stable inflation expectations

Question

Quizplus · Accepted Answer

The simple Phillips curve model assumes relatively few supply shocks, a stable natural rate of unemployment, and stable inflation expectations. It does not assume relatively few demand shocks; in fact, the model often examines how demand shocks affect inflation and unemployment.

The Simple Phillips Curve Model Continues to Perform Well in Many