Short Run Phillips Curve
14/02/2024 18:31
▪ Macroeconomic Conflict (trade off) is Unemployment + inflation
▪ Low unemployment is good as people have more disposable income
▪ But if it goes too low, fewer workers available to work
▪ Remaining unemployed people have more bargaining power to negotiate higher
▪ Firms have no choice but it increases their costs
▪ So firm's will have to increase prices to make profit despite the higher wage cos
▪ Price level increases causes inflation
▪ Low unemployment leads to higher inflation
▪ This trade off was discovered in the 1950's by William Phillips
▪ low inflation = high unemployment
▪ The Phillips curve shows the tr
unemployment + inflation
14/02/2024 18:31
▪ Macroeconomic Conflict (trade off) is Unemployment + inflation
▪ Low unemployment is good as people have more disposable income
▪ But if it goes too low, fewer workers available to work
▪ Remaining unemployed people have more bargaining power to negotiate higher
▪ Firms have no choice but it increases their costs
▪ So firm's will have to increase prices to make profit despite the higher wage cos
▪ Price level increases causes inflation
▪ Low unemployment leads to higher inflation
▪ This trade off was discovered in the 1950's by William Phillips
▪ low inflation = high unemployment
▪ The Phillips curve shows the tr
unemployment + inflation
