In 1958, A. W. Phillips discovered an empirical relationship between inflation and unemployment, now called the Phillips Curve (https://en.wikipedia.org/wiki/Ph

In 1958, A. W. Phillips discovered an empirical relationship between inflation and unemployment, now called the Phillips Curve (https://en.wikipedia.org/wiki/Phillips_curve https://en.wikipedia.org/wiki/Phillips_curve) -- the higher the inflation rate, the lower the unemployment rate. Milton Friedman argued that the trade-off only existed for unexpected inflation. Once everyone anticipates that inflation, it will have no impact on unemployment. That's what happened in the stagflation era. The New Keynesians use an expectations-adjusted Phillips curve, which take into account this effect on expectations. In New Keynesianism there is a short-run trade-off, because prices do not instantly adjust, but there is no long-run trade-off once prices actually do adjust.