With a successful policy of inflation targeting and a successful supply- side policy to reduce unemployment, the path of inflation and unemployment over time would seem to suggest a Phillips curve that is

Question

Quizplus · Accepted Answer

A successful policy of inflation targeting would stabilize inflation rates, while a successful supply-side policy to reduce unemployment would lower unemployment rates without necessarily causing inflation to rise, suggesting a situation where inflation and unemployment do not trade off in the traditional Phillips curve manner, thus appearing horizontal.

With a Successful Policy of Inflation Targeting and a Successful