Phillips Curve Review

These flashcards cover key concepts related to the Phillips Curve from the lecture, providing definitions and clarifications on various terms.

Phillips Curve

A graphical representation showing the inverse relationship between the unemployment rate and the inflation rate.

Short Run Phillips Curve (SRPC)

Illustrates the short-run inverse relationship between inflation and unemployment, depicted as a downward sloping curve.

Inverse Relationship

A relationship where one variable increases while the other decreases; in the context of the Phillips Curve, as inflation increases, unemployment decreases, and vice versa.

Natural Rate of Unemployment (NRU)

The unemployment rate that exists when the economy is at full employment, represented on the long run Phillips Curve.

Cost Push Inflation

A situation where rising costs of production result in increased prices, leading to higher inflation and higher unemployment.

Stagflation

A period of inflation and stagnant economic growth where inflation and unemployment rise simultaneously.

Long Run Phillips Curve (LRPC)

A vertical curve representing the idea that in the long run, there is no trade-off between inflation and unemployment.

Positive Supply Shock

An event that increases supply, typically resulting in lower prices and lower unemployment, shifting the short run Phillips curve to the left.

Negative Supply Shock

An event that decreases supply, typically resulting in higher prices and higher unemployment, shifting the short run Phillips curve to the right.

Expected Inflation Rate (πe)

The inflation rate that people expect in the future, important for determining actual unemployment rates in the economy.