Prior to the seminal papers by Friedman (1968) and Phelps (1968), which introduced the expectations-augmented Phillips curve and the concept of the natural rate of unemployment, it was commonly held that a policy maker could use fiscal and monetary stimulus to keep the economy at a permanently low rate of unemployment as long as it was willing to tolerate a high enough rate of inflation. Friedman and Phelps, however, argued that the actual unemployment rate could remain below a certain natural rate only insofar as the monetary authority could generate an actual inflation rate that exceeded the expected rate of inflation. Absent expectation errors, the economy would settle down at the natural rate of unemployment.