In the 1960s, many economists and policy makers considered the trade-off between inflation and unemployment revealed in the Phillips curve to be permanent.This belief was challenged by ________, who argued that there is no trade-off between inflation and unemployment in the long run.

Question

Quizplus · Accepted Answer

Milton Friedman and Edmund Phelps challenged the belief in the Phillips curve trade-off between inflation and unemployment with their theory of the natural rate of unemployment. They argued that in the long run, there is no trade-off between inflation and unemployment and that the unemployment rate will tend towards its natural rate, which is determined by structural factors in the economy.

In the 1960s, Many Economists and Policy Makers Considered the Trade-Off