Posted: August 16th, 2022
The Phillips curve represents the relationship between unemployment and inflation
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The Phillips curve represents the relationship between unemployment and inflation. This assignment requires the application of your understanding of the Phillips curve and motivates you to think about the impact on the economy of movements along the curve.
If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.
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