💼In the short run, there is an inverse relationship between inflation and unemployment.
📈Changes in expected inflation can shift the short-run Phillips curve.
📋The Phillips curve is not applicable in the long run.
🔀Stagflation can shift the short-run Phillips curve to the right.
📉In the long run, changes in inflation do not affect output or unemployment.
What does the Phillips curve show?
—The Phillips curve shows the relationship between inflation and unemployment in the short run.
Is the Phillips curve applicable in the long run?
—No, the Phillips curve is not applicable in the long run.
What factors can shift the short-run Phillips curve?
—Changes in expected inflation and other factors can shift the short-run Phillips curve.
What is stagflation?
—Stagflation is an economic situation of slow or stagnating growth, high inflation, high unemployment, and low consumer demand.
Do changes in inflation affect output and unemployment in the long run?
—No, changes in inflation do not affect output or unemployment in the long run.
00:00[Music]
00:05The Phillips curve shows an inverse relationship between inflation and unemployment in the short run.
02:06Evidence from the 1970s suggested that the inverse relationship between unemployment and inflation weakened.
04:01Milton Friedman and Edmund Phelps argued that there is not one single Phillips curve but a series of short-run and long-run Philips curves.
05:50The long-run Phillips curve corresponds to the natural rate of unemployment and is vertical.
