Money Trivia Quiz
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5. Graphically revealing
The Phillips Curve, introduced in a paper by New Zealand economist William Phillips in 1958, attempted to reveal the relationship between two quantities of vital interest to economists. What were they?
Your answer — A) Balance of trade and minimum wage — was incorrect.
Phillips’ paper, along with follow-up studies by other economists, appeared to show a clear inverse relationship between the unemployment rate and the inflation rate, such that when one was high, the other was low. This view was refuted as simplistic by Milton Friedman and others in the 1960s; their criticism was soon confirmed by the phenomenon of “stagflation” in the 1970s, as Friedman had predicted. Today, a more nuanced outlook is often adopted that incorporates both “short-run” and “long-run” versions of the Phillips curve.
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