In 1968, economist Milton Friedman published a paper that was critical of the Phillips curve. On what grounds did Friedman criticize the Phillips curve?
A) It seemed to work for wages but not for inflation.
B) Monetary policy was ineffective in combating inflation.
C) The tradeoff illustrated by the Phillips curve did not apply in the long run.
D) Phillips had made errors in collecting his data.

Question

Quizplus · Accepted Answer

Friedman criticized the Phillips curve on the grounds that the tradeoff between inflation and unemployment illustrated by the curve did not apply in the long run. Friedman argued that in the long run, changes in the rate of inflation would not have an effect on unemployment, as workers and firms would adjust their expectations accordingly, leading to a shift in the curve. Therefore, policies aimed at reducing unemployment by increasing inflation would only lead to higher inflation without any long-term reduction in unemployment.

In 1968, Economist Milton Friedman Published a Paper That Was