What did Friedman and Phelps argue about inflation and unemployment?
A) that in the long run, monetary growth did not influence those factors that determine the unemployment rate
B) that the Phillips curve could be exploited in the long run by using monetary, but not fiscal policy
C) that the short-run Phillips curve was very steep but the long-run curve was very flat
D) that there was neither a short-run nor long-run tradeoff between inflation and unemployment

Question

Quizplus · Accepted Answer

Friedman and Phelps argued that in the long run, monetary policy does not affect the natural rate of unemployment, which is determined by real factors such as market structures, policies, and institutions. They challenged the idea of a stable trade-off between inflation and unemployment, suggesting that any attempt to reduce unemployment below its natural rate with monetary expansion would only lead to higher inflation in the long run without affecting unemployment.

What Did Friedman and Phelps Argue About Inflation and Unemployment