Asked by garrett miles on May 04, 2024
Verified
If there is a large and sudden but temporary increase in the price of oil, which way does the short-run Phillips curve shift? If the central bank does not respond what happens to inflation and the unemployment rate in the long run?
Short-run Phillips Curve
A graphical representation showing the inverse relationship between unemployment and inflation rates in an economy over the short term, suggesting a trade-off between the two.
Price of Oil
The cost per barrel of crude oil as determined by global markets, influenced by factors such as supply and demand, geopolitical events, and economic indicators.
Unemployment Rate
The share of the employment pool that is currently without work yet is actively trying to find a job.
- Associate demographic changes and supply disruptions with their consequences on the Phillips curve and economic scenarios.
- Evaluate the effect of supply shocks and central bank measures on the stability of the economy in the short run and the long haul.
Verified Answer
MK
Mamta KirpalaniMay 05, 2024
Final Answer :
The short-run Phillips curve shifts right. Both the inflation rate and the unemployment rate return to their original values.
Learning Objectives
- Associate demographic changes and supply disruptions with their consequences on the Phillips curve and economic scenarios.
- Evaluate the effect of supply shocks and central bank measures on the stability of the economy in the short run and the long haul.