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If inflation falls why would unemployment rise?
When economists look at inflation and unemployment in the short term, they see a rough inverse correlation between the two. When unemployment is high, inflation is low and when inflation is high, unemployment is low. This has presented a problem to regulators who want to limit both. This relationship between inflation and unemployment is the Phillips curve. The short term Phillips curve is a declining one. Fig 2.4.1-Short term Phillips curveThis is a rough estimation of a short-term Phillips curve. As you can see, inflation is inversely related to unemployment. The long-term Phillips curve, however, is different. Economists have noted that in the long run, there seems to be no correlation between inflation and unemployment.
Explain the short-run Philips curve and long-run Philips curve?
The Phillips Curve is the negative relationship between unemployment and inflation. If you want to have less unemployment the cost is inflation. In this sense, you can also say that there is a positive relationship between output and inflation, because output is negatively correlated with unemployment (firms need workers to produce more). The first thing you have to kept in mind is that the Phillips relation is only true for shocks in Aggregate Demand. For instances, when the U.S. suffered from stagflation on the 70s (inflation and low output - or inflation and higher unemployment) the evidence showed that not always the Phillips curve are right. In this case, the oil shocks affected suppliers costs and thus the Aggregate Supply. Given this, the Phillips Curve holds in the short-run for any shock on AD. In the long-run the production (unemployment) of an economy depends on its inputs abundance and their efficiency, independently of the nominal variables (like prices, inflation, etc.). So the Phillips curve is an horizontal line, the natural unemployment is independent of the inflation! Gustavo Almeida, Portugal, gdireitinho@gmail.com
What is the relationship between long-run average cost curve and short-run average cost curve?
what is the relationship between long run average cost curve and short run average cost curve?
In normal cirucmstances is there a short run tradeoff between the rate of inflation and the rate of unemployment?
Yes. Inflation causes businesses to have to cut costs, and labor is one of the easily cuttable costs. See the Phillips Curve.
What is the short curve bones of the chest?
rib
What is alcohol tolerance curve?
very short
A firm's marginal cost curve above the average variable cost curve is also?
A firm's short run supply curve
Why lac curve is called envelope curve?
Because it envelopes the Short Run Cost curves.
What are the key differences between the long run supply curve and the short run supply curve in economics?
The key difference between the long run supply curve and the short run supply curve in economics is that the long run supply curve is more elastic and flexible, as firms can adjust their production levels and resources in the long run. In contrast, the short run supply curve is less elastic and more rigid, as firms have limited ability to change their production capacity in the short term.
How is a long-run average cost curve different from a short-run average cost curve?
The long-run average cost curve is longer.
What is a firm's short run supply curve?
A perfectly competitive firm's supply curve is that portion of its marginal cost curve that lies above the minimum of the average variable cost curve.
Why is it that short run aggregate supply curve is normal?
Because the supply curve basically is for the short run, and not permanent for the long run. That's why it's considered normal.
