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  • Phillips Curve in Its Modern Form:: e N t+1 T

    Transféré par

    Suryakant Kaushik
    9 vues1 page
    The Phillips Curve model shows that inflation (π) is equal to expected inflation (πe) minus the sensitivity (ω) of inflation to the difference between the actual and natural unemployment rates, plus the effects (ρ) of external events. Workers cannot be fooled in the long run - as inflation rises, workers anticipate higher prices and negotiate higher pay, shifting the Phillips Curve upward. This higher pay discourages hiring and unemployment will return to its natural level.

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    The Phillips Curve model shows that inflation (π) is equal to expected inflation (πe) minus the sensitivity (ω) of inflation to the difference between the actual and natural unemployment rates, plus the effects (ρ) of external events. Workers cannot be fooled in the long run - as inflation rises, workers anticipate higher prices and negotiate higher pay, shifting the Phillips Curve upward. This higher pay discourages hiring and unemployment will return to its natural level.

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    9 vues1 page

    Phillips Curve in Its Modern Form:: e N t+1 T

    Transféré par

    Suryakant Kaushik
    The Phillips Curve model shows that inflation (π) is equal to expected inflation (πe) minus the sensitivity (ω) of inflation to the difference between the actual and natural unemployment rates, plus the effects (ρ) of external events. Workers cannot be fooled in the long run - as inflation rises, workers anticipate higher prices and negotiate higher pay, shifting the Phillips Curve upward. This higher pay discourages hiring and unemployment will return to its natural level.

    Droits d'auteur :

    © All Rights Reserved
    Téléchargez comme PPTX, PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 1

    Bag:Phillips Curve in its modern form:

    = e (U Un) + . Note the similarity to t+1 = t +


    (Y Y*)/Y
    where is the sensitivity of inflation to the difference
    between actual unemployment rate, U and the natural
    rate of unemployment, Un. stands for the effects of
    external events, such as natural disasters, oil embargo,
    etc.
    Workers cant be fooled over the long-run. Inflation
    cant be hidden from them. As inflation rises, workers
    anticipate higher prices and begin to negotiate higher
    pay. Higher pay discourages employers from hiring ,
    shifting the PC curve upward. And, unemployment will
    return to its natural level!!

    Tag:- I have worked for seven years and I remember


    the time when my appraisal used to come. When I had
    the discussion with my HR, I used to bring out the
    comparison of pay hike percentage with the inflation

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