A stable Phillips curve does not allow for the possibility of stagﬂation.

Question

Quizplus · Accepted Answer

The Phillips curve traditionally illustrates an inverse relationship between inflation and unemployment, suggesting that higher inflation comes with lower unemployment and vice versa. Stagflation, a combination of high inflation and high unemployment, contradicts this stable relationship, indicating that the curve does not account for or allow for such a scenario.

A Stable Phillips Curve Does Not Allow for the Possibility