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Phillips curve review sheet

Phillips curve review sheet - π e = m old m new low Demand...

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Demand shocks 1 : change in the level of money supply (M, not m!) or balanced budget spending change: expansionary (e.g. spending increase) short run medium run medium run equilibrium contractionary (e.g. spending cut) Supply Shock (e.g. to oil prices): oil prices rise medium run equilibrium short run medium run oil prices fall Phillips Curve: Shocks π π e u N u Short run Phillips curve : u C is proportional to π e π u N u π π e π π e u N u u N u π m new, high
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Unformatted text preview: π e = m old m new, low Demand shocks 2 : change in the “rate of change” of the money supply (m, not M!): m raised short run medium run medium run equilibrium m lowered Cyclical unemployment is total . minus natural unemployment. . The Philips curve shifts if . and only if people update . their inflation . expectations. ECN 1B-0A March 12, 2010 Lucas M. Herrenbrueck ....
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