Chapter 21 - Phillips Curve and Some Recap - Jing

Chapter 21 - Phillips Curve and Some Recap - Jing - Chapter...

Info icon This preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 21
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Another way of studying inflation cycles: Focus on relationship & S/R trade-of between inflation and unemployment Phillips curve Why? We want to study changes in expected and actual inflation rates We want to study the S/R trade-of between inflation and real economic activity (real GDP and Ue) Two time frames : S/R Phillips curve L/R Phillips curve Inflation and Unemployment: The Phillips Curve
Image of page 2
Shows the relationship between inflation and unemployment, holding constant: Expected inflation rate Natural unemployment rate The Short-Run Phillips Curve SAS ↔ S/R Phillips curve
Image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Shows the relationship between inflation and unemployment when the actual inflation rate equals the expected inflation rate The Long-Run Phillips Curve LRPC is vertical at the natural Ue rate
Image of page 4
A change in the natural Ue rate shifts both the LRPC and the SRPC Changes in the Natural Unemployment Rate
Image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
The US Phillips Curve Theory meets data…
Image of page 6
Reading http://www.yourarticlelibrary.com/inflation/in flation-meaning-causes-and-effects-effects-of- inflation/29293/
Image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Some Recap Slides
Image of page 8
The AS-AD model AS-AD model explains how real GDP and the price level are determined Framework for understanding forces affecting GDP growth Inflation Business cycle fluctuations The Business Cycle: Uneven pace of economic growth and inflation ∆s in Ue
Image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
1. The Macroeconomic Long run and Short run The Macroeconomic L/R: Long enough for real wage (W/P) to have adjusted to achieve Y F or U f. Real GDP = Potential GDP Unemployment rate = natural unemployment rate The Macroeconomic S/R: Period during which some money prices are sticky Real GDP >,< or = Potential GDP U e rate >,< or = natural U e rate The AS-AD model explains: The behaviour of real GDP and the price level in the S/R How the economy adjusts to restore L/R equilibrium and Y F
Image of page 10
2. Aggregate Supply (AS) The quantity of real GDP supplied (Y) is the total quantity that firms want to produce during a given period. Quantity supplied depends upon FOPs Key FOP = Labour (S L and D L ) Key assumption = Perfectly competitive labour market THE LABOUR MARKET IS NB!
Image of page 11

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
L/R Aggregate Supply Relationship between the quantity of real GDP supplied and the price level in the L/R when real GDP = potential GDP.
Image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern