phillips curve (1 Viewer)

[Blondie]

ok, i know that the phillips curve is used to show the relationship bw unemployment and inflation. but does anyone know what it looks like?!

 

[TastesGoodBut]

have u got a text book???

i cant draw it on the forums lol...

but ill try...


Inflation %
| \
| \
| \
| \
| \
| \
|___________\_________ unemployment %



now pick a level of inflation. draw a horizontal parallel line to where it meets that diagonal line (which is actually meant to curve in that direction of the diagonal but meh), and then if u draw a vertical line to where it meets the unemployment axis u will find the unemp rate.

thus as u will see by testing points, u will get diff levels of uemp and inflation... the higher unemp the lower inflation, and vice versa...


JUST LOOK IN HTE BOOK I CANT BELIEVE I WASTED TIME DOING THAT! =P

 

[TastesGoodBut]

ok that fucked... never mind ... i cant help you lol...

the line cuves from near where inflation is high, and curves downwards to where unemp is high...

 

[Blondie]

so it curves inward towards where the two axes meet?

(and i looked in my textbook, but couldnt find it.)

 

[timmii]

It looks like the top right section of a hyperbola. As unemployment increases, inflation decreases (in the short term) and vice versa.

 

[Newbie]

some books show unemployment dipping below zero
thats wrong.....right?

 

[cakes]

Originally posted by Newbie
some books show unemployment dipping below zero
thats wrong.....right?

where it cuts the axis is NAIRU?? i think..

 

[Newbie]

dunno
forgot
im gona leave it above the axis anyway

 

[eeyore]

Originally posted by cakes
where it cuts the axis is NAIRU?? i think..

really? I thought the NAIRU was about 6% or something, like a figure. If it's where it crosses the axis wouldn't that make it 0?
but I really don't know what I'm talking about!

 

[Nick]

it can go below the X axis, cos inflation (Y axis) can be negative

unemployment is the X axis, and has to be positive.

 

[saves.the.day]

From my notes:
"the philllips curve cuts the horizontal axis to illustrate that beyond a certain level of unemployment, inflation can be negative, that is, deflation"

 

[Blondie]

....................i still dunno what it looks like :,(

 

[saves.the.day]

Originally posted by Blondie
....................i still dunno what it looks like :,(

http://www.blizzardhacks.net/upload/images4/phillipscurve.1068519725.gif

So yeh at inflation of I1, the unemployment level is U1. As unemployment increases, notice how inflation decreases denoting an inverse relationship. The curve then cuts the horizontal axis to illustrate that past a certain level of unemployment, inflation can be negative, that is, deflation.

 

[Blondie]

thanks!!

 

[Minai]

Remember, if ur gonna talk about the Phillips curve in your essays/short answers, dont forget this tradeoff between inflation and unemployment only holds true in the short run