PowerPoint Presentation:
With an increase in output from Y1 to Y2 there must be an increase in the amount of labour used (less unemployment)
Monetarist View of the Phillips Curve:
Monetarist View of the Phillips Curve
PowerPoint Presentation:
Equilibrium is at A and
inflation is at P1 There is an increase in AD and firms increase wages to encourage more workers to supply their labour Workers have money illusion (think they have higher real wages) and supply more labour Firms can supply more There is a temporary movement along the SRAS curve to Z Workers realise that inflation has increased and adjust their expectations (the increase was only nominal) Workers supply less labour Output returns to Yf at point B Monetarist View of the Phillips Curve There is no trade off between unemployment and inflation in the long run – the long run AS curve is inelastic and therefore any increase in AD will only lead to inflation
So who is right?:
So who is right?