US scoops Nobel economics prize

[Stockholm]

snip

Professor Phelps has been concerned with explaining the relationship between unemployment and inflation, which had been described by some economists as a trade-off.

He argued that inflation expectations could become embedded in the economy, leading to stagflation despite high unemployment.

This also meant that if inflation expectations were kept in check, the economy could run at a lower level of unemployment than would otherwise be the case.

Such views helped influence central banks to try and curb inflationary expectations promptly.

http://news.bbc.co.uk/2/hi/business/6033837.stm

http://nobelprize.org/