Phillip Curve???

i have assignment to present about phillip curve. one thing that i know that this curve connected with unemployment and rate of inflation. please help me i don%26#039;t want my teacher fail me?

Phillip Curve???care credit

Whenever unemployment is low, inflation tends to be high. Whenever unemployment is high, inflation tends to be low. This inverse relationship between inflation and unemployment is called the Phillips curve.

The Phillips curve is a relative relationship. Unemployment is considered low or high relative to the so-called natural rate of unemployment. Inflation is considered low or high relative to the expected rate of inflation.

The definitions of the natural rate of unemployment and expected inflation are nearly circular. What is the natural rate? It is the rate of unemployment at which inflation is equal to expected inflation. What is expected inflation? It is the inflation rate that prevails when unemployment is equal to its natural rate.

LOCATING A PHILLIP CURVE

What determines the location of the Phillips curve when drawn on a graph with unemployment on the horizontal and inflation on the vertical axis? Two things determine the location of the Phillips curve: the expected rate of inflation and the natural rate of unemployment.

The Phillips curve must pass through that point on the graph at which actual inflation is equal to expected inflation, and at which the actual rate of unemployment is equal to the natural rate of unemployment.

Any shift in the natural rate of unemployment (and the natural rate of unemployment can shift) will shift the Phillips curve to the left or the right. Any shift in expected inflation (and expected inflation does shift) will shift the Phillips curve up or down.

A STEEP PHILLIP CURVE

The Phillips curve is steep when so-called nominal rigidities in the economy are few and weak--and thus when prices respond quickly and substantially to changes in demand.

Nominal rigidities are weak when labor unions have few members, when long-term contracts contain many automatic price escalator clauses, when there are few long-term contracts, and when people expect inflation to be volatile and thus adjust their plans according to what changes in inflation they see.

When the Phillips curve is steep, even a small change in unemployment will have a large effect on the rate of inflation.

A STEEP PHILLIP CURVE

The Phillips curve is shallow when so-called nominal rigidities in the economy are common and strong --and thus when prices respond slowly and sluggishly to changes in demand.

Nominal rigidities are strong when labor unions have many members, when long-term contracts contain few automatic price escalator clauses, when there are many long-term contracts, and when people expect inflation to be constant and thus do not look for changes in inflation.

When the Phillips curve is shallow, even a large change in unemployment will have only a small effect on the rate of inflation.

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Phillip Curve???

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~You got problems, then, don%26#039;t you? Stop playing Play Station and hit the books. Those are those boxey looking things collecting dust on the library shelves. The library is that room in the school that only the nerds go to. Ask any teacher, they can tell you the way.

If you don%26#039;t know how books work, try Wikipedia.|||Well, the Phillips curve ostensibly shows how inflation and unemployment are related (as one rises, the other falls). However, I%26#039;m not sure it%26#039;s actually true. Recent history has provided examples of periods where the Phillips curve hasn%26#039;t proven true. Good luck.|||The Phillips Curve shows the inverse relation between inflation and unemployment. If unemployment goes down, rhen inflation goes up. The logic behind this finding is that, if unemployment goes down, more people are working. So with more people working, there is more money in the hand of consumers to spend. With spending going up, demand for goods goes up, and a sudden change in demand makes prices go up, so inflation goes up.

Now, as inflation goes up, companies will try to save up so they can pay for the higher prices, so they start laying off workers. So unemployment goes up, and inflation goes down. Its a cycle. That was explained in a very simplistic way to make a point.

Look at the source and you will fin out more about this theory.|||The inverse relation between unemployment and inflation is valid only on a short run. Long Run Phillip Curve is vertical, when unemployment rate equals to NRU(natural rate of unemployment)|||In macroeconomics, the Phillips curve (PC) is a supposed inverse relationship between inflation and unemployment.

A.W. Phillips, in his 1958 paper %26quot;The relationship between unemployment and the rate of change of money wages in the UK 1861-1957%26quot; published in Economica, observed an inverse relationship between money wage changes and unemployment in the British economy over the period examined. Similar patterns were found in other countries and in 1960 Paul Samuelson and Robert Solow took Phillips%26#039; work and made explicit the link between inflation and unemployment鈥攚hen inflation was high, unemployment was low, and vice-versa. As seen to the right, when drawn on a graph with the inflation rate on the vertical axis and the unemployment rate on the horizontal axis, the relationship between the variables showed a downward sloping curve, the Phillips curve (PC).

It is little known that the American economist Irving Fisher pointed to this kind of Phillips curve relationship back in the 1920s. On the other hand, Phillips%26#039; original curve described the behavior of money wages. So some believe that the PC should be called the %26quot;Fisher curve.%26quot;

In the years following his 1958 paper, many economists in the advanced industrial countries believed that Phillips%26#039; results showed that there was a permanently stable relationship between inflation and unemployment. One implication of this for government policy was that governments could control unemployment and inflation within a Keynesian policy. They could tolerate a reasonably high rate of inflation as this would lead to lower unemployment 鈥?there would be a trade-off between inflation and unemployment. For example, monetary policy and/or fiscal policy (i.e., deficit spending) could be used to stimulate the economy, raising gross domestic product and lowering the unemployment rate, as shown by the change marked A in the diagram. Moving along the Phillips curve, this would lead to a higher inflation rate, the cost of enjoying lower unemployment rates.

To a large extent, a leftward movement along the PC describes the path of the U.S. economy during the 1960s, though this move was not a matter of deciding to achieve low unemployment as much as an unplanned side-effect of the Vietnam war. In other countries, the economic boom was more the result of conscious policies.