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For more information, please see full course syllabus of AP Macroeconomics
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Lecture Comments (2)

1 answer

Last reply by: Professor Jibin Park
Thu May 15, 2014 9:30 AM

Post by Angela Patrick on May 15, 2014

For the short run phillips curve are you expected to draw the line through the unemployment axis or are we expected to draw the line within the boundaries? I guess my question is, is it common knowledge where the graders are sure to know it is appropriate, because my teacher never showed me this?

Inflation & Unemployment

  • The Short-Run Phillips Curve or the SRPC shows the inverse relationship between unemployment and inflation
  • The Long-Run Phillips Curve or the LRPC is a vertical line, as there is no relationship between unemployment and inflation
  • People tend to base their expectations of inflation based on their experiences
  • The unemployment rate at which inflation does not change over time sis known as the nonaccelerating inflation rate of unemployment, or NAIRU
  • Deflation is the fall in the aggregate price level
  • Deflation, ultimately, reduces aggregate demand and can lead to a recession or a depression
  • A liquidity trap occurs when interest rates are at 0% and traditional expansionary monetary policies cannot be used to “boost” the economy

Inflation & Unemployment

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:09
  • The Short-Run Phillips Curve 1:05
    • High Unemployment Rate
    • Low Unemployment Rate
  • Short-Run Phillips Curve Graph 3:20
  • Inflation Expectations 6:24
    • Increase in Expected Inflation
    • Expectations Based on Experience
  • Inflation and Unemployment in the Long Run 7:39
    • Most Economists Believe There is No Trade-Off Between Unemployment and Inflation
    • Nonaccelerating Inflation Rate of Unemployment NAIRU
    • Long-Run Phillips Curve
  • Long-Run Phillips Curve and NAIRU 9:24
  • The Costs of Disinflation 12:03
    • Harder to Bring Inflation Down Than to Increase It
    • Disinflation
    • Long-Term Benefit of Controlling Double-Digit Inflation
    • Announcing Policy of Disinflation
  • The Costs of Deflation 15:21
    • Deflation is the Fall in the Aggregate Price Level
    • Why is Deflation Bad?
    • Lenders Gain and Borrowers Lose
    • Effect of Deflation
  • Japan's Liquidity Trap of the 1990s 19:30
    • Liquidity Trap
    • Japan Example
  • Example 1 23:48
  • Example 2 25:14
  • Example 3 27:05
  • Example 4 28:31