Unemployment and inflation

Throughout the 1960s, Keynesians and mainstream economists had believed that the government faced a stable long-run trade-off between unemployment and inflation: the so-called phillips curve. In this view the government could, by increasing the demand for goods and services, permanently reduce unemployment by accepting a higher inflation rate.

But in the late 1960s, Friedman (and Columbia University’s Edmund Phelps) challenged this view. Friedman argued that once people adjusted to the higher inflation rate, unemployment would creep back up. To keep unemployment permanently lower, he said, would require not just a higher, but a permanently accelerating inflation rate.

Source: http://www.econlib.org/library/Enc/bios/Friedman.html

Su-Min Yuen