<< Chapter < Page Chapter >> Page >


The neoclassical phillips curve tradeoff


From a long-run as curve to a long-run phillips curve

(a) With a vertical LRAS curve, shifts in aggregate demand do not alter the level of output but do lead to changes in the price level. Because output is unchanged between the equilibria E 0 , E 1 , and E 2 , all unemployment in this economy will be due to the natural rate of unemployment. (b) If the natural rate of unemployment is 5%, then the Phillips curve will be vertical. That is, regardless of changes in the price level, the unemployment rate remains at 5%.

Tracking inflation and unemployment rates

Suppose that you have collected data for years on the rates of inflation and unemployment and recorded them in a table, such as [link] . How do you interpret that information?

Year Inflation Rate Unemployment Rate
1970 2% 4%
1975 3% 3%
1980 2% 4%
1985 1% 6%
1990 1% 4%
1995 4% 2%
2000 5% 4%


Inflation rates





Questions & Answers

what is crowding out effect?
Sera Reply
What to read the introduction
prince Reply
Keynesian theory of employment
sainlangki Reply
it's about use of Fiscal policy.
yar what actually means of APc. averge means?. can someone give a best example plz
Asrar Reply
APC is average propensity to consume n this refers to ratio of consumption expenditure to corresponding level of income
then it means both MPC and ApC are same ?
which model predicted a global collapse in the world's social and economic system before the year 2010
Francis Reply
trade deficit
is trade deficit the correct answer?
what is the formula of mixed income ?
Sanjum Reply
labor force in.Nigeria is seen as .......?
Aisha Reply
Is demand the same as being in need of a product?
Aphiwe Reply
Demand is defer from only need of products
need is the primary and main root of demand. but demand is the result of combination of need; income capacity and desire to expend of money for that product.
products or services
what is price determination?
Alick Reply
why are imports subtructed when GDP is calculated in the expenditure approach
what is fiscalpolicy
nati Reply
The way of the government expenses and other analysis
It explains government spending and how it helps to direct the economy towards the desired direction. For instance, if the govt of a nation is desirous of achieving economic growth and development, then the govt will adopt an expansionary fiscal policy which imply more spending by the govt.
and politics party important
mujtaba Reply
politics party important
Which party is that
persons who stopped searching for jobs but would accept if the opportunity presents itself
Torissa Reply
persons who are unemployed whether they are underage, retired or incapacitated
the us economy is best characterized as?
what is the impact of fiscal policy in the short and long run in the AD/AS model...
Hydrammeh Reply
What is demand
Mohd Reply
Demand is the desire for a commodity backed by the willingness and the purchasing power too.
what is the impact of the higher tax rate on the business and the economy at large..?
Hydrammeh Reply
aggregate demand decreases and GDP decreases in the long run prices will decrease because aggregate supply will shift to the right and increase
Thanks, Murabit
But still I will need more explanation
no problem tax rate is a form of fiscal policy so any time the government changes spending or taxes it will directly affect the economy
but remember that there at different economic views on fiscal policy there is classical,Keynesian and moneterism
if taxes increase aggregate demand decreases causing a fall in prices causing a fall in the money demand lowering interest rate and increasing investment spending in turn increasing prices
thanks so much Murabit
what is Ricardo effect
why is direct tax superior than indirect tax?
@Saz Bh! The reason why direct tax superior than indirect tax because during a period of prosperity, direct tax fetch more revenue as they are progressive but indirect taxes are proportional and do not fetch as much revenue as direct taxes
thank u
what is the difference between demand and aggregate demand?
The difference between market demand and aggregate demand delineates the fundamental difference between microeconomics and macroeconomics. Microeconomics is concerned with the supply and demand of specific goods and services. Macroeconomics is concerned with a nation's total supply and demand of all
thank u Pankaj 😁
most welcome
what is Function of Money in mixed economy.?
what is the pinnacle importance of the Banks in the country's Economy

Get the best Macroeconomics course in your pocket!


Notification Switch
