31.2 Short-Run and Long-Run Phillips Curves
MyEconLab Concept Video
The short-run Phillips curve shows the tradeoff between inflation and unemployment when the natural unemployment rate and expected inflation rate remain the same. Changes in the natural unemployment rate and the expected inflation rate change the short-run tradeoff and changes in the expected inflation rate give rise to a long-run Phillips curve that we’ll now examine.
The Long-Run Phillips Curve
The long-run Phillips curve shows the relationship between inflation and unemployment when the economy is at full employment. At full employment, the unemployment rate is the natural unemployment rate, so on the long-run Phillips curve, there is only one possible unemployment rate: ...
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