Explain how the short-run and long-run Phillips curves are related
What will be an ideal response?
The short-run Phillips curve is the relationship between the inflation rate and the unemployment rate when the natural unemployment rate and the expected inflation rate remain constant. The long-run Phillips curve is the relationship between the inflation rate and the unemployment rate when the economy is at full employment. The short-run Phillips curve is downward sloping, indicating that if the expected inflation rate and natural unemployment rate do not change, a higher inflation rate decreases the unemployment rate. The long-run Phillips curve is a vertical line illustrating that in the long run, the economy at full employment can have any inflation rate. The short-run Phillips curve intersects the long-run Phillips curve at the expected inflation rate. A change in the expected inflation rate shifts the short-run Phillips curve but has no effect on the long-run Phillips curve. An increase in the natural unemployment rate shifts both the short-run and the long-run Phillips curve.
You might also like to view...
Which of the following is an example of an excise tax?
a. a tax on the wages that a firm pays its workers b. a tax on tobacco c. a tax on corporate profits d. the portion of federal income taxes earmarked to pay for Social Security and Medicare
Economic efficiency
What will be an ideal response?
The primary benefits derived from tariffs usually accrue to the:
A. domestic consumers of goods protected by the tariffs. B. foreign producers of goods protected by the tariffs. C. domestic producers of export goods. D. domestic suppliers of goods protected by the tariffs.
A price increase from $43 to $49 results in an increase in quantity supplied from 220 units to 240 units. The price elasticity of supply in this price range is
What will be an ideal response?