Priniciples Of Macroeconomics, Student Value Edition Plus New Myeconlab With Pearson Etext -- Access Card Package (11th Edition)
Priniciples Of Macroeconomics, Student Value Edition Plus New Myeconlab With Pearson Etext -- Access Card Package (11th Edition)
11th Edition
ISBN: 9780133456370
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
Question
Chapter 14, Problem 1P
To determine

Tradeoff between inflation and unemployment.

Expert Solution & Answer
Check Mark

Explanation of Solution

There is an inverse relation between unemployment and inflation. The Philips curve explains this inverse relationship or tradeoff between unemployment and inflation in an economy. The Philips curve will shift leftward, when there is an improved tradeoff between inflation and unemployment. The main reasons behind improved tradeoff between inflation and unemployment are, increased productivity, increasing efficiency in labor market, falling world prices and falling supply side factors. These factors might improve the tradeoff.

The main factors, which decrease the tradeoff between inflation and unemployment are, the decrease in productivity and the increases in resource prices.

Economics Concept Introduction

Unemployment: This is a situation of being unemployed.

Inflation: A rise in the general price level in an economy is called inflation.

Philips curve: Philips curve explains the inverse relationship between unemployment and inflation.

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Chapter 14 Solutions

Priniciples Of Macroeconomics, Student Value Edition Plus New Myeconlab With Pearson Etext -- Access Card Package (11th Edition)

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