The phillips curve

Question 1

The phillips curve

Answer 1

Illustrates the inverse relationship between inflation and unemployment.

Question 2

SRPC

Answer 2

downward sloping showing the trade-off between inflation and unemployment.

Question 3

Long-Run Phillips Curve (LRPC) (2)

Answer 3

Vertical line at the natural rate of unemployment

shows NO trade-off between inflation and unemployment in the long run.

Question 4

• Expansionary Policy (↑ AD):
• Contractionary Policy (↓ AD):

Answer 4

moves SRPC Left

moves SRPC right

Question 5

The Phillips Curve failed when inflation and unemployment both rose due to SUPPLY SHOCKS

Answer 5

Stagflation 1970s