Unemployment :
Unemployment
Slide 14:
With an increase in output from Y1 to Y2 there must be an increase in the amount of labour used (less unemployment)
Slide 15:
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 Use supply side policies to fix unemployment not demand side policies
Growth :
Growth
International :
International
Slide 23:
Trade No Trade