- Discuss, using a short-run Phillips curve diagram, the view that there is a possible trade-off between the unemployment rate and the inflation rate in the short run.
- Explain, using a diagram, that the short-run Phillips curve may shift outwards, resulting in stagflation (caused by a decrease in SRAS due to factors including supply shocks).
- Discuss, using a diagram, the view that there is a long-run Phillips curve that is vertical at the natural rate of unemployment and therefore there is no trade-off between the unemployment rate and the inflation rate in the long run.
- Explain that the natural rate of unemployment is the rate of unemployment that exists when the economy is producing at the full employment level of output
This is an HL only topic and could very well be part of a Paper 1 (essay) question.... particularly part (b) of a long essay.... the evaluation section. So make sure you can use this type of analysis when evaluating government policy choices.
The tasks addressing the objectives above are in the following document - download a copy and complete.
Jason Welker has uploaded two videos on both the short run and the long run Phillips Curves
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