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.

Explain the concept of the long run Phillips Curve and its implications for unemployment.

How do changes in aggregate demand (AD) affect the relationship between inflation and unemployment according to the Phillips curve?