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) unemployment and inflation.
D) monetary and fiscal policy.
E) rule-making and discretionary policy.

Question

Quizplus · Accepted Answer

The Phillips curve relationship showed a inverse trade-off between unemployment and inflation, meaning that if one decreased, the other would increase. This led economists and policy makers to think they could manage the economy by choosing the appropriate level of inflation that corresponded with an acceptable level of unemployment.

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