Question

In: Economics

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve. Explain how the...

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve.

Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate.

When the natural unemployment rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

Solutions

Expert Solution

Phillips curve is an economics concept developed by A W phillips in which he states that there is a stable and inverse relationship between inflation and unemployment.

The short-run Phillips curve is an L-shape when the unemployment rate is on the x-axis and the inflation rate is on the y-axis and depics negative relationship between the inflation rate and the unemployment rate.

The long-run Phillips curve is a vertical line at the natural rate of unemployment, so inflation and unemployment are unrelated in the long run. Decreases in unemployment can lead to increases in inflation, but only in the short run. In the long run, inflation and unemployment are unrelated.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Using the Phillips curve diagram and in words, illustrate what happens to the short-run/long-run Phillips curve...
Using the Phillips curve diagram and in words, illustrate what happens to the short-run/long-run Phillips curve (inflation and unemployment) when the economy faces a “tight” labor market (actual unemployment rate is below the natural rate). Make sure you properly label all the axes and curves. Hint: Differentiate between short-run and long-run and think how this affects the inflation expectations.
Describe the Phillips Curve and its significance in the short-run and long-run. Include a graph.
Describe the Phillips Curve and its significance in the short-run and long-run. Include a graph.
The Phillips curve in the short run and long runIn the year 2023, aggregate demand...
The Phillips curve in the short run and long runIn the year 2023, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves AD2023AD2023 and AS on the following graph.Suppose the natural level of output in this economy is $6 trillion.On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy.Economists have forecast that if the government does nothing and the economy continues to...
If the Phillips curve is vertical in the long run, what will happen if the central...
If the Phillips curve is vertical in the long run, what will happen if the central bank tries to push unemployment rate below its natural rate?
If the Phillips curve is vertical in the long run, what will happen if the central...
If the Phillips curve is vertical in the long run, what will happen if the central bank tries to push unemployment rate below its natural rate?
Discuss whether it is an acceptable assumption to view the long-run Phillips curve as a straight...
Discuss whether it is an acceptable assumption to view the long-run Phillips curve as a straight vertical line at society’s “natural” rate of unemployment.
a) What is the difference between the short-run AS curve and the long-run AS curve? Define...
a) What is the difference between the short-run AS curve and the long-run AS curve? Define each and explain the underlying assumptions. What would cause each to shift either to the right or left? b) What does the concept “sticky wages” refer to? Explain its implications within the AD/AS model.
how does short run phillips curve being used today 2020?
how does short run phillips curve being used today 2020?
When answering parts a and b, draw the relevant Phillips curve. Using a short-run Phillips curve,...
When answering parts a and b, draw the relevant Phillips curve. Using a short-run Phillips curve, what is the effect on the unemployment rate if the inflation rate unexpectedly rises. Using a long-run Phillips curve, what is the effect on the unemployment rate if the inflation rate rises and people expect the rise. Explain how your answer to part a about the unexpected rise in the inflation rate changes in part b as the inflation rate becomes expected.
Discuss whether it is an acceptable assumption to view the long-run Phillips curve as straight vertical...
Discuss whether it is an acceptable assumption to view the long-run Phillips curve as straight vertical line at society’s “natural” rate of unemployment.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT