THE PHILLIPS CURVE BY J.A.SACCO. The Phillips Curve 2  Named after A.W. Phillips, Br. Economist (1950’s)  Illustrates the twin objectives of price stability(inflation)

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Presentation transcript:

THE PHILLIPS CURVE BY J.A.SACCO

The Phillips Curve 2  Named after A.W. Phillips, Br. Economist (1950’s)  Illustrates the twin objectives of price stability(inflation) and full employment is extremely difficult to achieve  Conflict results from the fact that the price level begins to rise before the economy reaches full employment

The Phillips Curve 3 Unemployment Rate Inflation Rate The Phillips curve implies a policy trade-off between inflation and unemployment. 1)How does the Phillips Curve relate to the AD/AS Model. ? 2) How does a shift of AD and AS relate to both? 3) What are the causes of a shift of the SRPC? SRPC LRPC

The Phillips Curve 4 Unemployment Rate Inflation Rate SRPC LRPC 1)What does the LRPC represent? represent 2) How does the LRPC shift?