U.S. data on unemployment and inflation in the 1970s
A) led economists to place greater emphasis on the Phillips curve as a policy tool.
B) led to the belief that the Phillips curve may shift over time.
C) led to a dismissal of the adaptive-expectations theory.
D) enforced the belief that inflation is constant over time.
E) led to the belief that the Phillips curve is horizontal over time.

Question

Quizplus · Accepted Answer

The data on unemployment and inflation in the 1970s showed that the relationship between the two variables as described by the Phillips curve was not as stable as previously believed. This led to the belief that the Phillips curve may shift over time, indicating the best choice is B. Options A, C, D, and E are not supported by the data on unemployment and inflation in the 1970s.

US Data on Unemployment and Inflation in the 1970s