Multiple Choice
Which of the following explains why the original Phillips curve relation disappeared or,as some economists have remarked,"broke down" in the 1970s?
A) Individuals assumed the expected price level for the current year would be equal to the actual price level from the previous year.
B) Individuals assumed that expected inflation would be zero
C) Individuals changed the way they formed expectations of inflation.
D) Monetary policy became contractionary.
E) More labor contracts became indexed to changes in inflation.
Correct Answer:
Verified
Correct Answer:
Verified
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