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What is the difference in the nature of the Phillips Curve between the short-run and the long-run? What are implications of this for policy to control inflation and unemployment?
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What is the difference in the nature of the Phillips Curve between the short-run and the long-run? What are implications of this for policy to control inflation and unemployment? The title is about the Phillips curve and how it differs in the short and long run and how this guides policy makers in making economic policy. To address this I will firstly give definitions of the Phillips curve and the natural rate of unemployment. I will then look at the types of unemployment and then go onto an explanation of the Phillips curve. Finally I will say what the implications for policy are. Cyclical unemployment: Unemployment attributable to a general decline in macroeconomic activity, especially expenditures on gross domestic product, that occurs during a business-cycle contraction. When the economy dips into a contraction, or recession, aggregate demand declines, so less output is produced and fewer workers and other resources are employed. Hence...
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