4.9Recent evidence suggests that the Phillips curve has flattened. An article in theEconomiststates: "A flatter Phillips curve is good news when unem- ployment is falling. But it also implies bad news if inflation rises significantly."

1. If firms find it difficult to raise prices, why might the result be a flatter Phillips curve?
2. How would the effect of a demand shock be dif- ferent if the Phillips curve is relatively flat than if its relatively steep?
3. Whydoesthearticlearguethataflatter Phillips curve may be bad news if there is high inflation?