Answer to Question #248460 in Macroeconomics for Ndangano

Question

What happen in inflation and unemployment in the short run philip curve when sarb increase money supply

Answer 1

Inflation and unemployment rates have an inverse connection. This indicates that the short-run Phillips curve is L-shaped.

In 1958, A.W. Phillips presented his findings regarding the negative relationship between salary changes and unemployment in the United Kingdom. This link was discovered to be valid for other industrial countries as well.

From 1861 through the late 1960s, the Phillips curve forecasted inflation and unemployment rates. However, beginning in the 1970s and 1980s, inflation and unemployment rates deviated from the Phillips curve's forecast. The two variables' connection became shaky.