Chapter 35

Chapter 35 revisits the unemployment and inflation topic and tries to go more in depth. There is a short run tradeoff between unemployment and inflation. The Phillips curve represents this trade off in a graph of unemployment and inflation which slopes downward. It shows how inflation and unemployment change in response to changes in aggregate demand and aggregate supply. The long run Phillips curve is completely inelastic and vertical. It is affected by the natural rate of unemployment and instead demonstrates monetary neutrality. This chapter goes really in depth and again utilizes two graphs at once making it more difficult to grasp, so I would give this chapter a 2 out of 3.