Milton Friedman and Edmund Phelps argued in the late 1960s that in the long run the Phillips curve is
A)downward-sloping, which implies that monetary and fiscal policies can influence the level of unemployment in the long run.
B)downward-sloping, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.
C)vertical, which implies that monetary and fiscal policies cannot influence the level of unemployment in the long run.
D)vertical, which implies that monetary and fiscal policies cannot influence the rate of inflation in the long run.

Question

Quizplus · Accepted Answer

Milton Friedman and Edmund Phelps argued that in the long run, the Phillips curve is vertical, indicating that monetary and fiscal policies cannot permanently alter the natural rate of unemployment. This suggests that attempts to reduce unemployment below its natural rate through monetary and fiscal policies would only lead to higher inflation in the long run without affecting long-term unemployment.

Milton Friedman and Edmund Phelps Argued in the Late 1960s