State and briefly explain whether or not the empirical evidence generally supports the belief that there is a fixed trade-off between unemployment and inflation, such that monetary policymakers can achieve the combination they prefer

What will be an ideal response?

The Phillips curve suggests that there is a stable set of unemployment rate and inflation rate combinations, and that monetary policymakers could achieve the combination they prefer. The macroeconomic data for the 1950s and 1960s for many countries seemed consistent with this view, but further research using data for the 1970s and 1980s failed to show that a stable trade-off exists. The empirical evidence suggests that a stable trade-off exists only during the time period in which expected inflation and the natural unemployment rate remain unchanged. The extended classical model suggests that a nonsystematic expansionary monetary policy attempt to move up a fixed expectations-augmented Phillips curve to a lower unemployment rate and higher inflation rate will achieve its objective only for the short-run period in which the increase in inflation is not anticipated. Systematic monetary policies will be anticipated, so they cannot achieve their objective of temporarily reducing unemployment below the natural unemployment rate.