Answered: Do you observe a Phillips curve, a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Do you observe a Phillips curve, a reverse Phillips curve, or no relationship in the long-run?
Explain your answer! What does this imply about the stability of the short-run Phillips curve
over time?

I attach a picture. Just answer if there is a Phillips curve, a reverse Phillips Curve or no relationship and why you think so. Thank you.

FRED Unemployment Rate (left), Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (bottom), Jan 1948 Jan
2023
Percent
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
2.5
Source: U.S. Bureau of Labor Statistics
5
7.5
Percent Change from Year Ago
10
myf.red/g/104lk
12.5

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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