Question 2. a) Explain the Phillips Curve.

b) You are given the relevant data (with description) for Australia in a spreadsheet in the same folder as this assessment (File Name: Unemployment-Inflation). These are at quarterly frequency for the 2013-2022 period. Analyze the data (Hint: plot the relationship of the two variables against time) to test the relevance of the Phillips Curve for Australia. 15 (5 + 10) Marks

RELEVANT DATA IS PROVIDED IN THE PICTURE.

A B C D E F G H M N O period unemp_rate infl_rate Definitions N Mar-13 5.6 2.5 unemp_rate Unemployment rate calcualted as (the number of unemployed person / labor force) *100 3 Jun-13 5.7 2.4 infl_rate CPI inflation rate calcualted as (rate of change in CPI from previous period)*100 Sep-13 5.7 2.2 5 Dec-13 5.9 2.7 6 Mar-14 5.9 2.9 Jun-14 6.0 3 8 Sep-14 6.2 2.3 9 Dec-14 6.1 1.7 10 Mar-15 6.1 1.3 11 Jun-15 6.0 1.5 12 6.2 1.5 13 Dec-15 5.7 1.7 14 Mar-16 5.7 1.3 15 Jun-16 5.7 16 Sep-16 5.6 1.3 17 Dec-16 5.8 1.5 18 Mar-17 5.9 2.1 19 Jun-17 5.6 1.9 20 Sep-17 5.4 1.8 21 Dec-17 5.6 1.9 22 Mar-18 5.5 1.9 23 Jun-18 5.3 2.1 24 Sep-18 5.0 1.9 25 Dec-18 5.0 1.8 26 Mar-19 5.1 1.3 27 Jun-19 5.2 1.6 28 5.2 1.7 29 Dec-19 5.1 1.8 30 Mar-20 5.2 2.2 31 Jun-20 7.4 -0.3 32 Sep-20 6.9 0.7 33 Dec-20 6.6 0.9 34 Mar-21 5.7 1.1 35 Jun-21 4.9 3.8 36 Sep-21 4.7 3 37 Dec-21 4.2 3.5 38 Mar-22 3.9 5.1 39