Question
Even though the ideas implicit in the Phillips Curve were derived from long-run data from the British economy, it turned out that the trade-off between
Even though the ideas implicit in the Phillips Curve were derived from long-run data from the British economy, it turned out that the trade-off between unemployment and inflation implied by the Phillips Curve was a short-run phenomenon. This implies that using an expansionary fiscal policy produces long-term pain for short-term gain. This was the accepted economic theory in the 1970s. With that in mind, why do you think politicians in most democracies during the 1970s, including Canada and the U.S., opted for the short-term gain despite being aware of the long-term pain?
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