[Jas29]

Hey can anyone help me with this:
What lessons have economists learned over time regarding the Phillips Curve (ie: the relationship between inflation and unemployment)?

What are the government policy implications of these lessons?

My teacher wanted us to learn this ourselves but with work and school I found it hard to study for other finals and learn the last chapter by myself so any help will be appreciated thanks guys

[8cd03gro]

http://www.econlib.org/library/Enc/PhillipsCurve.html

The details of the answer you want to give will be largely dependent on your teacher and your textbook though, as with any economics course. I would focus on the postulations of those that challenged the Phillips Curve, like Friedman, for the answer to your first question. For the second question I would reference examples mentioned in the portion of that article below, "figure 1."

For example:

The 1970s provided striking confirmation of Friedman’s and Phelps’s fundamental point. Contrary to the original Phillips curve, when the average inflation rate rose from about 2.5 percent in the 1960s to about 7 percent in the 1970s, the unemployment rate not only did not fall, it actually rose from about 4 percent to above 6 percent.

Most economists now accept a central tenet of both Friedman’s and Phelps’s analyses: there is some rate of unemployment that, if maintained, would be compatible with a stable rate of inflation. Many, however, call this the “nonaccelerating inflation rate of unemployment” (NAIRU) because, unlike the term “natural rate,” NAIRU does not suggest that an unemployment rate is socially optimal, unchanging, or impervious to policy.


Everything you need to answer both questions can be found in that article. Good luck.