CFA Practice Question

CFA Practice Question

Later interpretations of the Phillip's curve suggested that:
A. Restrictive fiscal policy leads to crowding out.
B. There was a trade off between inflation and unemployment.
C. There was no trade off between inflation and unemployment.
Explanation: By the 1970's most economists suggested that there was no long term trade off between inflation and unemployment as periods of high inflation (when labour was cheap) would be followed by renegotiation of employment contracts.

User Contributed Comments 3

User Comment
ninad123 Long term phillip curve is vertical, this question got me !!
adamrej A distinction can be made between short- and long-term trade off.
adamrej There is a definitely a short-term trade off.
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