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Consider the following statements:
1.Monetarist Theory of Inflation was proposed by Adam Smith
2.Phillips curve shows a trade-off between Inflation and Tax Revenues
Which of these is/are correct?
1 only
2 only
Both 1 & 2
Neither 1 nor 2
Both statements are incorrect.
Monetarism is an economic theory that focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability. The Phillips curve is a single-equation empirical model, named after William Phillips, describing a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result within an economy. Stated simply, decreased unemployment, (i.e., increased levels of employment) in an economy will correlate with higher rates of inflation.
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