Which of the following hypotheses is supported by the economic experience of Canada during the late 1960s and early 1970s?
A)Actual inflation and unemployment are negatively correlated.
B)Inflation and unemployment are related only in the short run.
C)Policymakers can permanently reduce unemployment below the natural level.
D)Inflation and unemployment are related both in the short run and long run.

Question

Quizplus · Accepted Answer

During the late 1960s and early 1970s, Canada, like many other countries, experienced a short-run trade-off between inflation and unemployment, consistent with the Phillips Curve. However, in the long run, this relationship broke down, supporting the hypothesis that inflation and unemployment are related only in the short run.

Which of the Following Hypotheses Is Supported by the Economic