What did Friedman and Phelps argue about the relationship between inflation and unemployment?
A)The rate of inflation is related to unemployment in the long run.
B)Policymakers face a short-run Philips curve that is vertical.
C)The short-run unemployment rate is independent of the inflation rate.
D)Inflation and unemployment are unrelated in the long-run.

Question

Quizplus · Accepted Answer

Friedman and Phelps argued that in the long run, inflation and unemployment are unrelated. They believed that any attempts by policymakers to lower unemployment through expansionary policies would only result in a temporary decrease in unemployment, but at the cost of higher inflation. In the long run, there is no trade-off between inflation and unemployment, and the economy returns to its natural rate of unemployment regardless of the level of inflation. This argument is often referred to as the Natural Rate Hypothesis.

What Did Friedman and Phelps Argue About the Relationship Between