Long-Run Phillips Curve (LRPC)
- Because the Long-Run Phillips Curve exists at the natural rate of unemployment, structural changes in the economy that affect unemployment will also cause the LRPC to shift.
- Increases in natural rate of unemployment will shift LRPC right
- Decreases in natural rate of unemployment will shift LRPC left
Stagflation: period with high inflation and high unemployment occurring at the same time. (VN War, Civil Rights Movement, Women's Movement, Oil Embargo)
Disinflation: reduction in the inflation rate from year to year. Nominal wages increase
Deflation: situation in which there is an actual drop in the price level. Opposite of inflation.
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