When the Phillips Curve was first conceived, it was just that, the “Phillips Curve”. In other words, there was not a short-run and long-run curve. This original Phillips Curve is the modern day Short-Run Phillips Curve. It posited that lower and lower unemployment rates could be obtained as long as policymakers were willing to accept higher inflation rates. However, economists now believe this inverse relationship between the inflation rate and the unemployment rate breaks down in the long-run.
If policymakers attempt to lower the actual unemployment rate below the natural rate of unemployment via expansionary monetary and/or fiscal policy, they will only be able to accomplish this while inflationary expectations remain low. Once inflationary expectations begin to increase SRPC will shift up.
This video is made for 1st year college students or AP/IB Economics students. It focuses on foundational economic concepts.
3 дек 2023
