Phillips Curve

Question 1

Reasons for the Phillips Curve (2)

Answer 1

• When unemployment falls more workers have more disposable income, increasing demand pull pressures
• As unemployment falls workers have more bargaining power to negotiate higher wages as there is a smaller pool of workers

Question 2

Stagflation

Answer 2

When an economy experiences both high inflation and unemployment at the same time

Question 3

Movement in PC cause

Answer 3

Changes in AD

Question 4

Shift in PC caused by

Answer 4

Changes in SRAS

Question 5

Non-accelerating inflation rate of unemployment

Answer 5

Is the same concept as the natural rate of unemployment

Question 6

What does the PC show?

Answer 6

Any attempts to reduce UE below its natural rate only lead to inflation

Question 7

Government attempts to reduce UE with demand policies

Answer 7

Are ineffective and lead to higher inflation and return UE to its natural rate

Question 8

How to lower the natural rate of UE

Answer 8

Improvements must be made to the supply side of the economy