The macroeconomic conditions during the mid-1990s confounded many economists because of the simultaneous occurrence of
A)low unemployment and decreasing inflation rates.
B)low unemployment and increasing budget deficits.
C)low unemployment and increasing interest rates.
D)high unemployment and increasing inflation rates.

Question

Quizplus · Accepted Answer

The mid-1990s were characterized by low unemployment rates, which would typically be accompanied by increasing inflation rates. However, during this period, inflation rates were decreasing. This phenomenon was unexpected and confusing to economists, as it contradicted the conventional Phillips Curve relationship between unemployment and inflation.

The Macroeconomic Conditions During the Mid-1990s Confounded Many Economists Because