The original Philips curve was developed in the 1970s to explain simultaneous in

Question

The original Philips curve was developed in the 1970s to explain simultaneous increases in inflation and unemployment. illustrates the short-run trade-off between inflation and unemployment. proven remarkably stable over the years. was developed to show the trade off between real GDP and unemployment After several years of current data lying along the same Phillips curve, economists plot the newest statistics and find that their points lie well above the old curve. Which of the following is the best explanation? The government greatly reduced spending. New technology greatly reduced the cost of producing electricity. Increases in the prices of essential raw materials lead people to expect higher inflation in the future. When the newest economic date lies to the right of the Philips curve, that likely means the Philips curve has shirted upwards. is upward sloping. is irrelevant. has shifted down.

Explanation / Answer

(1) Original Phillips curve explains short run relationship between inflation and unemployment rate.

(2) Increases in price of raw materials lead people to expect higher future inflation.

(This version is called the inflation-augmented Phillips curve).

(3) Phillips curve has shifted upwards.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.