Learning Journal Activity:The Phillips curve represents the relationship between unemployment and inflation. This assignment requires the application of your understanding of the Phillips curve and motivates you to think about the impact on the economy of movements along the curve.If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.

You will delve further into the AD-AS model as you learn about Keynesian economics and the components of AD and why it is more likely to be the primary cause of recessions. This unit also introduces the Philips curve. As you think about inflation and unemployment, please note that (in most cases) they are negatively (inversely) related. Graphically, the negative relationship is represented by the Phillips curve. Broadly speaking, the more people have jobs (the lower the unemployment), the more people have income, the greater the aggregate expenditure, the greater the aggregate demand, the more consumers bid up prices, the greater the inflation rate. Please follow the links below to several videos that elaborate on this topic.

Reading Assignment

Read

Read Ch 12: The Keynesian Perspective

References

Geenlaw, S., & Shapiro, D. (2017). Chapter 12 | The Keynesian perspective. InPrincipals of macroeconomics 2e. Openstax. Licensed under CC BY 4.0.https://openstax.org/details/books/principles-macroeconomics-2e

You Will Love Economics. (2018, Feb 12). Macro: Unit 3.6 -- The Phillips Curve [Video]. YouTube. https://www.youtube.com/watch?v=ABOGxIHVHO4