Eco 202 ch 36 unemployment and inflation
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Eco 202 ch 36 unemployment and inflation

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    Eco 202 ch 36 unemployment and inflation Eco 202 ch 36 unemployment and inflation Presentation Transcript

    • 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 Unemployment
    • 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