Phillips curve
The Phillips curve appeared to reflect a clear, inverse relationship between inflation and output. The curve broke down in the 1970s as economies suffered simultaneous economic stagnation and inflation known as stagflation. The empirical implosion of the Phillips curve followed attacks mounted on theoretical grounds by Friedman and Edmund Phelps. Phelps, although not a monetarist, argued that only unexpected inflation or deflation impacted employment. Variations of Phelps's "expectations-augmented Phillips curve" became standard tools. Friedman and Phelps used models with no long-run trade-off between inflation and unemployment. Instead of the Phillips curve they used models based on the natural rate of unemployment where expansionary monetary policy can only temporarily shift unemployment below the natural rate. Eventually, firms will adjust their prices and wages for inflation based on real factors, ignoring nominal changes from monetary policy. The expansionary boost will be wiped out.