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Chapter 36Unemployment andInflation
Economic Cycle
Saudi Inflation Rate
Saudi Unemployment Rate
A.W. Phillips(1914 - 1975)Phillips CurveRelationshipbetweenInflation andUnemployment
Phillips CurveA curve that shows theshort-run trade-offbetween unemploymentand inflation
InflationRateUnemployment Rate4% 7%6%2%Phillips CurveTradeoffHigh Inflation and Low UnemploymentLow Inflation and High Unempl...
Milton Friedman(1912 - 2006)NoLong RunStructuralRelationshipbetweenInflation andUnemployment
PriceLevelQuantity of OutputP1AD- AS ModelAggregateDemandShort RunAggregateSupplyY1 Y2P2Long RunAggregateSupplyP3
Short-RunLong-RunInflation can reduceunemploymentInflation and unemploymentare unrelated
InflationRateUnemployment RatePhillips CurveShort-RunLong-RunNo relationshipbecause LRAS is vertical
Natural Rate HypothesisThe claim thatunemployment returns toits normal, or natural rateregardless of the rate ofinflation
Disinflationreduction in the rate ofinflation - slows downDeflationreduction in the price levelgo in reverse
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Transcript of "Eco 202 ch 36 unemployment and inflation"

  1. 1. Chapter 36Unemployment andInflation
  2. 2. Economic Cycle
  3. 3. Saudi Inflation Rate
  4. 4. Saudi Unemployment Rate
  5. 5. A.W. Phillips(1914 - 1975)Phillips CurveRelationshipbetweenInflation andUnemployment
  6. 6. Phillips CurveA curve that shows theshort-run trade-offbetween unemploymentand inflation
  7. 7. InflationRateUnemployment Rate4% 7%6%2%Phillips CurveTradeoffHigh Inflation and Low UnemploymentLow Inflation and High Unemployment
  8. 8. Milton Friedman(1912 - 2006)NoLong RunStructuralRelationshipbetweenInflation andUnemployment
  9. 9. PriceLevelQuantity of OutputP1AD- AS ModelAggregateDemandShort RunAggregateSupplyY1 Y2P2Long RunAggregateSupplyP3
  10. 10. Short-RunLong-RunInflation can reduceunemploymentInflation and unemploymentare unrelated
  11. 11. InflationRateUnemployment RatePhillips CurveShort-RunLong-RunNo relationshipbecause LRAS is vertical
  12. 12. Natural Rate HypothesisThe claim thatunemployment returns toits normal, or natural rateregardless of the rate ofinflation
  13. 13. Disinflationreduction in the rate ofinflation - slows downDeflationreduction in the price levelgo in reverse
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