One Event That Undermined the Belief That the Phillips Curve

question 11

Multiple Choice

One event that undermined the belief that the Phillips curve represented a structural relationship was

• A) the belief of Milton Friedman and Edmund Phelps that expected inflation remains constant.
• B) the erratic behaviour of unemployment rates and inflation rates during the 1960s.
• C) the extended period of time that both unemployment and inflation remained high during the Great Depression.
• D) the increase in both the inflation rate and the unemployment rate in the 1970s.

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Definitions:

Gross Domestic Product (GDP)

The aggregate value, measured in terms of money or market worth, of every finished product and service generated within a country's borders over a certain time span.

Common Stock

A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's profits.

Factory

A building or complex of buildings where goods are manufactured or assembled chiefly by machine.

Foreign Investment

The inflow of capital from external sources into a country to purchase assets, buy stocks, or fund projects, enhancing economic growth.