Phillips curve

下面为大家整理一篇优秀的essay代写范文 -- Phillips curve，文章讲述最初的菲利普斯曲线暗示失业与通胀之间存在权衡。当通货膨胀率下降时，失业率上升。当失业率下降时，通货膨胀率上升。因此，决策者只要愿意支付较高的通货膨胀率，就可以永远维持较低的失业率。

Phillips curve
i) The original Phillips curve implied that there is a trade-off between unemployment and inflation. When the inflation rate is falling, the unemployment rate is rising. And when the unemployment rate is falling, the inflation rate is rising. Thus policymakers could maintain a lower unemployment rate forever, as long as they were willing to pay the price of a higher inflation rate. However, the relationship broke down when policy makers tried to make use of it in 1970s because the original Phillips curve doesn’t apply to the long run. In the long run, price changes will have no impact on the unemployment rate, which will equal its natural rate as price and wage decisions are consistent. The economy will operate at Potential Real GDP. And the long-run Phillips curve is vertical at the natural rate of unemployment.
Another point is that when policy makers tried to benefit from this tradeoff, people started to assume positive inflation and the relationship broke down. If the expectations are stable, then the central bank can push the output to be above the natural level of output. This policy is effective only as long as people’s expectations remain lower than actual inflation.
ii) Aggregate supply and the Phillips curve share similar components. The rate of unemployment and rate of inflation found in the Phillips curve correspond to the real GDP and price level of aggregate supply. Changes in aggregate supply translate as movements along the Phillips curve. The Aggregate Supply Curve shows that, as the price level rises, the Real GDP (production) rises. And the increase in the money supply is the cause of the rise in prices. The decrease in unemployment is the cause of the rise in Real GDP (production). So the movement from one point to another point on the Aggregate Supply Curve reflects the movement from two opposite points on the Phillips Curve. When costs of production rise, the short-run aggregate supply shifts to the left and the Phillips Curve shifts to the right. However, in the long-run, the economy will operate at Potential Real GDP (and at the natural rate of unemployment), and the only result of an increase in the money supply is inflation.
iii) Speculation means the act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain. Over-speculation is an important aspect of inflation. Thus speculation rises, inflations rises, and the unemployment rate falls. On the contrary, if the unemployment rates falls in Phillips curve, then the inflation falls and people will tend to speculate instead of saving their money.

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