Understanding the Phillips Curve and its Role in Economic Management

The video explores how economies can be managed from a demand-side perspective, focusing on the Phillips curve, which illustrates the inverse relationship between inflation and unemployment. It discusses the historical context of the Phillips curve, its modern interpretation, and the monetarist critique that led to the concept of the long-run Phillips curve. The breakdown of the Phillips curve is examined, highlighting the limitations of the inverse relationship and the emergence of alternative economic models.

What does the Phillips Curve illustrate about the relationship between inflation and unemployment?

• A direct relationship

• An inverse relationship

• A constant relationship

• No relationship

In the modern form of the Phillips Curve, what replaces the money wage rate on the Y-axis?

• Exchange rate

• Inflation rate

• GDP growth rate

• Interest rate

What did monetarists like Milton Friedman identify about the Phillips Curve in the 1970s and 80s?

• The relationship is direct

• The inverse relationship always holds

• The relationship is constant

• The inverse relationship no longer holds

What does the long-run Phillips Curve suggest about the economy's unemployment rate?

• It increases indefinitely

• It fluctuates randomly

• It returns to the natural rate

• It can be permanently reduced

How can the logic of the Phillips Curve be demonstrated besides using the curve itself?

• Using a GDP growth chart

• Via an AD-AS diagram

• With a fiscal policy graph

• Through a supply-demand diagram