The Philips Curve
Suppose the economy has been experiencing zero inflation and five percent unemployment for several years. The government decides to lower the unemployment percentage by generating some inflation. You need to do the following:
1.Using the Grapher tool, create a graph showing what the short-run effects would be and what would happen in the long run.
2.Give reasons to explain what the government would have to do to keep the unemployment rate at 3 percent.
2 answers
I don't know what your "Grapher tool" is. That said, if the economy has zero inflation and 5% unemployment for several years, that sounds like equilibrium to me. Any attempts to move to an alternative position is, very likely, doomed to fail.
a) you only have to explain the theory of philip curve, with the help of the diagram of philip curve which shows the trade off between inflation and unemployment in the short run and nairu in the long run, that all. you will get the graph through various search engines.
2 answers