Contrary to what believers in the Phillips curve would say, U.S. economic data from 1955 to 2000 show evidence of:
A) a positive relationship between the unemployment rate and inflation.
B) no short-run relationship between the unemployment rate and inflation.
C) increases in both unemployment and inflation rates.
D) a constant rate of inflation, with changing rates of unemployment.
E) a constant rate of unemployment, with changing rates of inflation.

Question

Quizplus · Accepted Answer

The Phillips curve traditionally posits an inverse relationship between inflation and unemployment, meaning as one rises, the other falls. However, during certain periods, such as the 1970s stagflation in the U.S., both unemployment and inflation rates increased, challenging the traditional Phillips curve model.

Contrary to What Believers in the Phillips Curve Would Say