Which of the Following Explains Why the Original Phillips Curve

question 42

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) Monetary policy became contractionary.
• B) More labour contracts became indexed to changes in inflation.
• C) Individuals assumed that expected inflation would be zero.
• D) Individuals changed the way they formed expectations of inflation.
• E) Individuals assumed the expected price level for the current year would be equal to the actual price level from the previous year.