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    Ed 11 Philips Curve

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    mithila debnath
    The document discusses the Phillips curve, which shows that policymakers face a trade-off between economic growth and inflation in the short run. Using monetary and fiscal policies to stimulate the economy carries risks of higher inflation. The Phillips curve should be used together with aggregate supply and aggregate demand models. Attempts to boost growth and lower unemployment can temporarily lead to more inflation through demand-pull and then cost-push effects, before the economy eventually returns to its original unemployment rate in the long run.

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    Ed 11 Philips Curve

    Uploaded by

    mithila debnath
    15 views1 page
    The document discusses the Phillips curve, which shows that policymakers face a trade-off between economic growth and inflation in the short run. Using monetary and fiscal policies to stimulate the economy carries risks of higher inflation. The Phillips curve should be used together with aggregate supply and aggregate demand models. Attempts to boost growth and lower unemployment can temporarily lead to more inflation through demand-pull and then cost-push effects, before the economy eventually returns to its original unemployment rate in the long run.

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    The document discusses the Phillips curve, which shows that policymakers face a trade-off between economic growth and inflation in the short run. Using monetary and fiscal policies to stimulate the economy carries risks of higher inflation. The Phillips curve should be used together with aggregate supply and aggregate demand models. Attempts to boost growth and lower unemployment can temporarily lead to more inflation through demand-pull and then cost-push effects, before the economy eventually returns to its original unemployment rate in the long run.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    15 views1 page

    Ed 11 Philips Curve

    Uploaded by

    mithila debnath
    The document discusses the Phillips curve, which shows that policymakers face a trade-off between economic growth and inflation in the short run. Using monetary and fiscal policies to stimulate the economy carries risks of higher inflation. The Phillips curve should be used together with aggregate supply and aggregate demand models. Attempts to boost growth and lower unemployment can temporarily lead to more inflation through demand-pull and then cost-push effects, before the economy eventually returns to its original unemployment rate in the long run.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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     Philips curve (short run) shows the “trade off” policy makers face in using monetary
    + fiscal policies to manage an economy: growth with inflation or contraction with
    lower inflation (disinflation). Injecting an economy has risks. Use with AS/AD.
    ED 11: Philips Curve
    curve

    SL+HL:
    1. Trade off: policies used by government will lead to a ‘trade off’ between
    unemployment + inflation ie more jobs with more inflation.

    For HL:

    2. Note the connection between the AS/AD and the Philips Curve. Attempts to reduce
    the natural unemployment rate with lead to more inflation. This is likely to be
    demand- pull inflation. This is likely to be followed by cost-push inflation as workers
    look for higher wages. Economy will only move away from Un temporarily and the
    economy according to the monetarists will return to Un in the Long Run

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