7 Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly Spain is suffering mass unemployment with a 25 per cent unemployment rate and half of those out of work under 25. Eurozone unemployment as a whole rose to 10.7 per cent. At the same time, Eurozone inflation unexpectedly rose to 2.7 per cent a year, up from the previous month’s 2.6 per cent a year.

Source: Huffington Post, 1 March 2012 a How does the Phillips curve model account for a very high unemployment rate?

b Explain the change in unemployment and inflation in the Eurozone in terms of what is happening to the shortrun and long-run Phillips curves.