The original Phillips Curve tradeoff between inflation and unemployment works when expectations about inflation do not change.

Question

Quizplus · Accepted Answer

The original Phillips Curve assumes a stable relationship between inflation and unemployment, and this stability can be maintained as long as inflation expectations are fixed. When expectations about inflation change, the Phillips Curve tradeoff can shift, and the curve may become steeper or flatter depending on the nature of the shift.

The Original Phillips Curve Tradeoff Between Inflation and Unemployment Works