In the early 1960s,the discovery of the Phillips curve relationship caused economists and policy makers to think that they understood the trade-offs between:
A)aggregate supply and aggregate demand.
B)interest rate and investment.
C)inflation and unemployment.
D)monetary and fiscal policy.
E)rule-making and discretionary policy.

Question

Quizplus · Accepted Answer

The Phillips curve relationship showed a negative correlation between inflation and unemployment, leading economists and policy makers to believe that they could manipulate one variable to influence the other. This suggested a trade-off between inflation and unemployment, with policies aimed at reducing inflation potentially leading to higher unemployment and vice versa. Therefore the correct choice is C) inflation and unemployment.

In the Early 1960s,the Discovery of the Phillips Curve Relationship