Macro Unit 3, Question 13: The Phillips Curve

The video explains the Phillips Curve, highlighting the differences between the short run and long run. It discusses how aggregate demand and supply shifts affect inflation and unemployment, leading to inflationary and recessionary gaps. The short run Phillips Curve shows an inverse relationship between inflation and unemployment, while the long run curve is vertical, indicating no relationship. Changes in aggregate demand and supply cause shifts in the Phillips Curve, illustrating economic conditions like inflationary and recessionary gaps.

What does the short-run Phillips curve illustrate?

• A direct relationship between inflation and unemployment

• An inverse relationship between inflation and unemployment

• No relationship between inflation and unemployment

• A constant rate of inflation

What happens to the Phillips curve during an inflationary gap?

• It shows high inflation and low unemployment

• It shifts to the right

• It shows low inflation and high unemployment

• It shifts to the left

How does a recessionary gap appear on the Phillips curve?

• Low inflation and low unemployment

• High inflation and low unemployment

• High inflation and high unemployment

• Low inflation and high unemployment

What is the effect of a leftward shift in aggregate supply on the Phillips curve?

• It causes the Phillips curve to shift left

• It causes the Phillips curve to shift right

• It results in lower inflation and unemployment

• It has no effect on the Phillips curve

When the aggregate supply curve shifts to the right, what happens to the Phillips curve?

• It becomes vertical

• It shifts to the left

• It shifts to the right

• It remains unchanged