Question

7. Derive the Short-Run Phillips Curve. ​

Answer 1

Answer:

The Phillips Curve is a relationship between unemployment and inflation, discovered by Professor A.W.Phillips. The relationship was based on observations he made of unemployment and changes in wage levels from 1861 to 1957. He found that there was a trade-off between unemployment and inflation, so that any attempt by governments to reduce unemployment was likely to lead to increased inflation. This relationship was seen by Keynesians as a justification of their policies.

The curve sloped down from left to right and seemed to offer policy makers with a simple choice - you have to accept inflation or unemployment. You cannot lower both.

Explanation:

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