Phillips Curve

Phillips Curve PowerPoint PPT Presentation


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Phillips Curve. . . Inflation. Unemployment. . .. .. .. . . . . . . A. B. C. . . . . . . Real GDP. PriceLevel. SRAS. LRAS. FE. . . . . . . RDP2. RGDP*. RGDP1. . . AD. . PL*. . AD1. . PL1. . AD. . PL2. . . . . . . . . SRPC. The Short-Run Phillips Curve illustrates the Trade-off between Inflation a

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Phillips Curve

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1. Phillips Curve Deriving the Phillips Curve from AD/AS Derive the Short and Long Run Phillips Curves What shifts the SRPC and the LRPC Short AND Long Term Effects of INFLATION on the Phillips Curve

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12. What SHIFTS the SRPC and the LRPC? The SRPC and LRPC are not static, they can shift left or right. SRPC is MARRIED to the SRAS curve on our AD/AS Model of the Economy WHATEVER shifts the SRAS curve causes the SRPC to shift as well. However they shift in OPPOSITE directions!!!

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16. Short Run Phillips Curve What do you think is going to happen to the SRPC in the event of a POSITIVE SUPPLY SHOCK??? SRAS curve shifts to the RIGHT and SRPC shifts to the LEFT!!!!

17. Phillips Curve IMPORTANT: Whenever causes the short run AS curve to shift INDEPENDENT of the LRAS curve is going to cause the Phillips Curve to shift as well. SRAS shifts RIGHT (positive supply shock) then the SRPC is going to shift to the LEFT SRAS shifts LEFT (negative supply shock) then the SRPC is going to shift to the RIGHT.

18. LONG RUN PHILLIPS CURVE What shifts the LONG RUN PHILLIPS CURVE? Changes in government benefits to the unemployed/underemployed Changes in the composition of the Labor force Changes in Supply-Side policies

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22. Why do some other major economies have persistently higher unemployment rates than the U.S. Government policies are a major culprit

23. Phillips Curve and The short and long terms effects of inflaton. We will use as an example a sub-topic from the #1 FRQ from the 2009 AP Macroeconomics Test

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