FreeEconHelp.com, Learning Economics... Solved!: Phillips curve
Showing posts with label Phillips curve. Show all posts
Showing posts with label Phillips curve. Show all posts

8/20/11

A vertical Phillip's curve shows that their is no trade off between inflation and unemployment

15:16
A vertical Phillip's curve shows that their is no trade off between inflation and unemployment

A question was recently asked: If the Phillips curve is _____ in the long run, there is no trade-off between inflation and unemployment in the long run.  In order to answer this question we will have to understand two things, how to graph relationships between two variables, and what the Phillip's curve looks like.  The Phillip's curve attempts to show the theoretical relationship between the inflation rate, and the unemployment rate in an economy.  The two have a significant relationship if we change one of the variables, say inflation, and we see that this causes a change in unemployment.  Lets test this idea on the graph to the left to see if we can come up with any sort of relationship given those two curves.