Eco 202 ch 36 unemployment and inflation

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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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