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In: Economics

Analyze why the recent 20-year U.S. unemployment and inflation data approves or disproves the short-run Phillips...

Analyze why the recent 20-year U.S. unemployment and inflation data approves or disproves the short-run Phillips curve.

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Expert Solution

the short-run Phillips curve depicts a trade-off between unemployment and inflation in the short run. In this context, unemployment impacts inflation, but only in a short period of time

from a macroeconomic perspective, this model is applicable in the 1960's. Stagflation, however, has proved the model wrong, as it has been determined to be unstable and less predictable policy measure and tool.

the increments in real output are caused by aggregate demand increases.when there is a decrease in unemployment, then output increases. when more individuals get employed, there is more economy spending. There is an occurrence of demand-pull inflation, which is inflation caused by growth in aggregate demand. This, in turn, causes the levels of prices to go high. However, this only occurs in the short run,and the recent US data relating to inflation and unemployment proves its a recurring issue, which cannot apply the concepts of the model of the short term period

Rahul Sunny answered 9 months ago
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