The original Phillips Curve trade-offs between inflation and unemployment become complicated over time if expectations change.

Question

Quizplus · Accepted Answer

As expectations about inflation and other economic variables change, the relationship between inflation and unemployment represented by the original Phillips Curve may shift or break down. This is known as the "breakdown of the Phillips Curve." As a result, policy makers may face more difficult trade-offs between inflation and unemployment than the Phillips Curve implied.

The Original Phillips Curve Trade-Offs Between Inflation and Unemployment Become