Tuesday, May 9, 2017

April 18, 2017
The Phillips curve
  • A trade off between inflation and unemployment
  • Inverse relationship
  • Each point of the Phillips curve corresponds to a different level of output
Long run Phillips curve
  • Occurs at the natural rate of unemployment
  • Represented by a vertical line
  • There is no trade off between inflation and unemployment in the long run
  • The economy produces at the full employment output level 
  • The LRPC (long run Phillips curve) will only shift if the LRAS shifts
  • Increases in unemployment will shift LRPC right
  • Decrease in unemployment will shift LRPC left
SRPC
  • Increase in AD = up/left movement along SRPC
  • Decrease in AD = down/right along SRPC
SRAS vs SRPC

  • SRAS right, SRPC left
  • SRAS left, SRPC right

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1 comment:

  1. Jordan C.May 19, 2017 at 12:16 PM

    Nice post. Would you consider adding real world examples of the graph? It's easy to explain this concept, but to apply it to the real world is another situation.

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