Friedman and Phelps Argued That the Phillips Curve Is Not

question 10

Multiple Choice

Friedman and Phelps argued that the Phillips curve is not stable over time because

• A)any kind of stabilization policy immediately affects nominal wages
• B)any shift in aggregate demand will immediately also shift the Phillips curve
• C)workers' expectations about price changes are only wrong temporarily
• D)firms change wage rates for workers as soon as product prices change, so profits will not suffer
• E)firms always immediately change their product prices in response to a change in money supply

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