Question

Describe and explain the inflation process the follows a period in which the economy is on a​ short-run Phillips curve below the natural unemployment rate. (Short and simple)

Answer 1

Ans

- The Phillips curve shows the reverse connection among inflation and unemployment: as unemployment diminishes, inflation increments.

- The connection between inflation rates and unemployment rates is converse. Graphically, this implies the short-run Phillips curve is L-formed.

- The Phillips curve relates the pace of inflation with the pace of unemployment. The Phillips curve contends that unemployment and inflation are contrarily related: as levels of unemployment decline, inflation increments.

- The relationship, in any case, isn't straight. Graphically, the short-run Phillips curve follows a L-shape when the unemployment rate is on the x-pivot and the inflation rate is on the y-hub.

The Phillips curve shows the opposite compromise among inflation and unemployment. As one expands, the other must diminish. In this picture, an economy can either encounter 3% unemployment at the expense of 6% of inflation, or increment unemployment to 5% to cut down the inflation levels to 2%.