The Phillips Curve and The Quantity Theory of Money

In the article “Money: The Real Truth about Money” by Gregg Easterbrook published In Time Magazine (2005), the author compares two different generation’s attitudes towards money, and how it affects their happiness. The author’s standing qualifies him to write and appeal this issue, he’s a contributing editor of The Atlantic and The Washington Monthly, and he also writes the Tuesday Morning Quarterback column for ESPN.com. Easterbrook’s primary audience appears to be middle class Americans however he draws a wider secondary audience’s attention. The author succeeded in convincing his readers through his rhetorical appeals, credible sources and his clever use of language.

Throughout our lives, we have moments that may impact us negatively and/or positively. In the short story “the money” by Junot Diaz we see his mother saving money to send to her parents in the Dominican Republic but his family is already in a struggle to survive. Then there was a turning point for the whole family, they were robbed. Diaz’s mother was enraged by the event “she cursed the neighborhood, she cursed the country, she cursed [his] father, and of course, she cursed [the] kids,” assuming that one of Diaz’s friends or his siblings’ friends had something to do with it (Diaz 3). Diaz suspected one of his friends and he was right. So, he then took it into his own hands and went to steal the money back. Once Diaz retrieved the money, he

To understand the poetry, it is important to know the poet. Dana Gioia is known as the face of Formalism. Formalist use the poetry elements of free verse, narratives, rhyme, and meter. In reality, Gioia fought for “poet’s freedom to use whatever style he or she felt was right for the poem” (Johnson 2011). His poetry often focuses on themes associated with life’s struggles and responsibilities of the middle-class. His second book The Gods of Winter appeared in 1991 and consists of poems created from grief after losing his young son to Sudden Infant Death (Mason 2015). Yet another short poem in the volume will make you laugh with its play on words until its meaning is understood. Dana Gioia’s poem “Money” demonstrates how the poet uses the poetic form of free verse, metaphors, a sarcastic tone and drab imagery to reveal a personal struggle between responsibilities, fitting in and his passion for poetry.

The news informs everyone on a daily basis that the United States has the largest economy and that it is looking to be in great shape since four years ago. To some Americans it seems otherwise. The unemployment rate in 2007 was 4.6% compared to unemployment rate in 2012 at 7.5%. The U.S inflation rate ended in October 2012 after twelve months was 2.16% which is 0.11% higher than the one in September. The U.S inflation forecast consists of apparel, education and

The Undesirable temporary connection between Price increases and Unemployment. The inflation is calculated along the perpendicular axis, and the unemployment percentage is calculated along the plane axis. This can disturb both the unemployment percentage or the price increases, it can disturb the splurging and the economy. It will partake in temporary impacts in anticipation of the economy being secure.

1). In 2016, the inflation rate was at 2.07 percent, and as of February 2017 the rate is about .90 percent (“Inflation Rate,” n.d.). As we can see, the economy has bounced back from its position during the recession. GDP has increased drastically since 2009, unemployment has decreased past its position from 2007, the interest rate has risen, and inflation has also gone up which indicates a strong and healthy economy. Although a higher interest rate is unfavorable for consumers and businesses, it means that the government is confident that the economy will continue to improve. This also means that consumers have enough disposable income to spend on whatever they wish, so the government does not need to lower the rate in order to encourage borrowing and spending. These metrics indicate that the economy has recovered from the Great Recession, and is continuing to improve.

In economics, with the inflation is a rise in the actual general level of prices of goods and services in an economy from over a period of time. When the general price level rise, such as each of the units currency buys fewer goods and services. Consequently, inflation reflects a reduction in the purchasing power4 per unit of money. This therefore means that with the loss of real value in the medium of exchange and unit of account within the given and actual economy. With a chief measure for example and the price of inflation is within the given inflation rate, the annualised percentage change within a general price index over time in which is normally the consumer price index.

It helps policy makers to assess the different outcomes and make policy changes based on the information from the Philips curve. There are two types of Phillips curves. One is the short-run Phillips curve, which shows the inverse relationship between inflation and unemployment rates. The second is the long-run Phillips curve, which is the straight line that shows the opportunity cost of inflation and unemployment. However, opportunity cost means gain and loss inflation and unemployment are not related in the long run Phillips curve. Many economists argue on whether the Phillips curve is stable or

Conflict can occur between economic growth and inflation which in turn leads to conflict between unemployment and inflation. When an economy grows too quickly pressure on inflation rates increase. Australia’s current inflation rate is 1.3% (Economy Snapshot RBA 2016) The current acceptable rate of inflation nationally is between 1% to 3%. Inflation is defined as the sustained rise in the general level of prices in a market. For prices to be stable we should aim for 0% inflation rate. Introducing a fluid monetary policy which concentrates on identifying the fundamental causes of inflation rate rises in an economy, will assist in keeping inflation under control. For instance, if there were to be an excessive increase in demand for goods and services, demand being the primary factor for a rise in inflation, on a government level it should say to us, we need to identify the causes and commence action as quickly as possible to decrease the level of demand to ensure stability of the inflation

Real gross domestic product (GDP) is an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year (Investopedia.com, 2004). Inflation is the fluctuation of the costs for goods/services and this has a negative impact of increasing unemployment; individuals who are searching for work and are unable to find employment (“Introduction to economics,” 2012).

Imagine that you wake up and turn on the television as you are getting ready for work at 0600. You decide to watch the news, specifically the business channel. As you watch the news you learn that the Dow futures is down 300 points and that the Asian and European markets have done poorly. As you continue to listen to the news you learn that there is another healthcare facility that is laying off 3,000 people nationwide. Are you shocked by this information? Most likely you are not. This is how many people in the United States start each morning. There continues to be fluctuations in the economy, even though the numbers show that there is slight improvements. The purpose of this paper is examine unemployment, the interest rate and inflation,

The unemployment rate in the United States has improved dramatically over the last two years, from a high of 8.3% in July 2012, to a low of 6.6% in January 2014. In October of 2012, the civilian labor force increased from 578,000 to 155.6 million, labor force participation increased up to 63.8%, and total employment overall rose by 410,000! Since then, the unemployment rate has been falling at a stable rate due to a political push from Washington DC and new employment initiatives. The inflation rate over the last 2 years has been relatively stably, with a few major increases and decreases in 2012 and 2013. It reached a high of 2.3% in June of 2012, and reached a low of 1.0% at the end of 2013. The federal interest rate has remained at a constant .25% over the past few years.

The debate about the relationship between inflation and unemployment is mainly based on the famous “Phillips Curve”. This curve was first discovered by a New Zealand born economist called Allan William Phillips. In 1958, A. W. Phillips published an article “The relationship between unemployment and the rate of change of money wages in the United Kingdom, 1861-1957”, in which he showed a negative correlation between inflation and unemployment (Phillips 1958). When the unemployment rate is low, the inflation rate tends to be high, and when unemployment is high, the inflation rate tends to be low, even to be negative.

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

In the 70’s Friedman developed his theory of inflation on the correlation of inflation and unemployment on the basis of a critical analysis of the (Keynesian) Phillip’s curve. The key elements in the examination of the mutual links between the inflation process and the situation in the labor market are in his construct a natural rate of unemployment, (adaptive) expectations of inflation, as well as a