Lecture 14: AD-AS + The Phillips Curve

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Presentation transcript:

Lecture 14: AD-AS + The Phillips Curve Review: Aggregate supply and demand The Phillips curve

AD-AS: Canonical Shocks P AD Y Monetary expansion; fiscal expansion; oil shock (figs 7-9/7-10/7-11)

The Phillips Curve (t) =  (t) + (+z) -  u(t) * The price level vs The inflation rate e P(t) = P (t) (1+ ) F(u(t), z) > (t) =  (t) + (+z) -  u(t) e * original Phillips curve; Figures: 8-1/8-2/8-3/8-4/8-5

The Phillips Curve and The Natural Rate of Unemployment  (t) =  (t) => u = (+z)  (t) =  (t) -  (u(t) - u ) n e n