Final answer:
The modern interpretation of the Phillips curve suggests that there is no long-term tradeoff between unemployment and inflation. Aggressive anti-inflation policies do not guarantee low unemployment over time, as the long-term Phillips curve is vertical at the natural rate of unemployment, showing that inflation rates can vary without affecting this natural rate.
Step-by-step explanation:
The statement provided in the question is False. The modern view of the Phillips curve indicates that there is no long-term tradeoff between unemployment and inflation, meaning policies aimed aggressively at fighting inflation do not ensure that low unemployment will be maintained. While the short-term Phillips curve may indicate a tradeoff between unemployment and inflation, this relationship does not hold in the long run due to shifts in aggregate supply. In the long term, the Phillips curve is vertical at the natural rate of unemployment, indicating that any inflation rate can be consistent with the natural rate of unemployment.
Keynesian macroeconomics suggests that during a recession, expansionary fiscal policy such as tax cuts or increased government spending can be employed to shift aggregate demand to the right, thereby reducing unemployment without necessarily causing high inflation. This is different from merely fighting inflation without regard to employment levels.
Milton Friedman's View on Phillips Curve Tradeoff
The economist Milton Friedman articulated that there may exist a short-term tradeoff between inflation and unemployment, but over the long term, such tradeoff does not exist. A major implication of Friedman's view is that efforts to keep the unemployment rate below the natural rate through monetary expansion will lead to accelerating inflation but not to permanently lower unemployment.