Phillips Curve Flashcards
What is a historical inverse relationship between the rate of unemployment and the rate of inflation in an economy?
The Phillips Curve
In 1960 Paul Samuelson and Robert Solow took Phillips work and found that when inflation was _______ unemployment was ______ and vice-versa.
High
Low
High levels of both inflation and unemployment is known as what?
Stagflation
Phillips curve came under attack because of stagflation from a group of economists lead by who?
Milton Friedman
Who won the Nobel Prize in Economics in 2006 for using the natural Rate of unemployment to explain short and long term Phillips Curve?
Edmund Phelps
The NAIRU says that when unemployment is at the rate defined by the long-run Phillips Curve line, __________ will be stable.
Inflation
NAIRU says in the short-term Phillips Curve policy makers will face an inflation-unemployment ___________.
Trade off
Reduction in unemployment below the “Natural Rate” will be temporary and lead only to higher ___________ in the long run.
Inflation
NAIRU stands for?
non-accelerating inflation rate of unemployment
NAIRU arises because with unemployment below it, inflation ___________ but with unemployment above it, inflation ____________.
Accelerates
Decelerates
The rational expectations theory said that expectations of inflation were ________ to what actually happened.
Equal
Most economists today no longer use the Phillips curve in its original form because it was shown to be too what?
Simplistic
The short-run Phillips Curve is also called the what?
Expectations-augmented Phillips Curve
The long-run Phillips curve or natural Rate of unemployment is known as the what?
NAIRU or non-accelerating inflation rate of unemployment
Who produced the triangle model?
Robert J. Gordon
The triangle model says the inflation rate is the sum of what three things?
Demand pull or short term Phillips curve
Cost push or supply shocks
Built-in inflation
Low unemployment and high inflation for a long time shifts the short-run Phillips curve __________ and _________.
Rightward
Upward
High unemployment and low inflation for a long time shifts the short-run Phillips curve _________ and _________.
Leftward
Downward
A positive relation between the rate of inflation and the level of demand, and a negative relation between rate of inflation and unemployment is called what?
New Keynesian Phillips Curve
Williams Phillips originally wrote about nominal wages and unemployment, who took his work and made a relationship between unemployment and inflation?
Paul Samuelson
Robert Solow
What are the two main factors shifting the short-run Phillips Curve?
Supply shocks
Changes in built in inflation
The Phillips curve started as an empirical observation in search of a what?
Theoretical explanation
Who said there is a short term correlation between inflation shocks and employment?
Milton Friedman
Workers do not encounter their employers in a perfect market but rather a complex combination of __________ markets.
Imperfect
Built-in inflation is not “inflationary expectations” but rather that high inflation gathers ____________ and continues beyond the time it was started.
Momentum
Low unemployment raises the workers bargaining power allowing for a push of higher nominal wages. To protect profits, employers do what?
Raise prices
Who rejects the Phillips Curve altogether and says inflation is rather a combination of a lot of factors?
Jeffery Herbner
Edmund Phelps distinguished between long and short term Phillips curve to explain what?
Stagflation
