RAT 4

Accelerationist Phillips Curve

A formulation of the Phillips curve equation where the natural rate of unemployment can be interpreted as the non-acceleration inflation rate of unemployment

Adaptive Expectations

Expectations that are formed by looking at the past and therefore change only slowly over time (pie sub-1)

\
Can be interchanged with pie^e

Aggregate Supply Curve

Represents the relationship between the total quantity of output that firms are willing to produce and the inflation rate

\
Replaces (U-Usubn) with (Y-Y^p)

Backward-Looking Expectations

Expectations that are formed by looking at the past and therefor change only slowly over time (pie sub-1)

\
Can be interchanged with pie^e

Cost-Push Shocks

Where workers push for wages higher than productivity gains, thereby driving up costs and inflation

Expectations-Augmented Phillips Curve

An equation for the Phillips curve that indicates that inflation is negatively related to the different between the unemployment rate and the natural rate of unemployment

\
Represented as pie^e

Long-Run Phillips Curve

The line connecting all possible long-run relationships between the inflation rate and the unemployment rate

Natural Rate of Output

The level of aggregate output supplied at the natural rate of unemployment

Natural Rate of Unemployment

The level of unemployment rate that remains even when wages in the labor market have fully adjusted, which can be interpreted as the full-employment level of unemployment

Non-Acceleration Inflation Rate of Unemployment (NAIRU)

The rate of unemployment where inflation stops accelerating

Okun’s Law

Describes the negative relationship between the unemployment gap and the output gap

\
Slope = Change in Unemployment Rate / GDP Growth

Phillips Curve

The negative relationship between unemployment and inflation

\
Slope = Inflation Rate/Unemployment Rate (pie/U)

Price Shocks

Shifts in inflation that are independent of the tightness in the labor markets or of expected inflation (p)

Unemployment Gap

The difference between the unemployment rate and the natural rate of unemployment