Ch. 33 Phillips Curve DEFINE… LABEL Short Run Trade Off b/w inflation and unemployment……..* exists only ….. In short run,,,not in long run ?

SRPC ….in…. MACRO PRACTICE 1. Draw the economy in LRE Draw corresponding LRPC and SRPC Identify a determinant to shift AD to create an inflationary gap Show the results on both graphs In the long run, how does the economy correct itself? Show the results on both graphs. Explain why the LRPC is vertical

SRPC ….in…. MACRO PRACTICE 2. Draw the economy in LRE Draw corresponding LRPC and SRPC Identify a determinant to shift AD to create a recessionary gap Show the results on both graphs In the long run, how does the economy correct itself? Show the results on both graphs. Explain why the LRPC is vertical

SRPC ….in…. MACRO PRACTICE 3. Draw the economy in LRE Draw corresponding LRPC and SRPC Identify a determinant to create stagflation Show the results on both graphs

…..so can you identify a “RULE” about shifting SRPC? ….when SRAS shifts right, SRPC shifts left …..

Identifying with just the Phillips Curve Show LRE Show Inflationary gap Show Recessionary gap

Shifting LRPC???? When? Why? What? (does it mean?)