The Phillips Curve

INTRODUCTION

Today we will study the relationship between unemployment and inflation using the Phillips Curve model.

HOMEWORK

Assignments: Read Mankiw (Chapter 35) and watch the following videos.

Required

Optional

Video #3

Khan Academy

• Moderate inflation in a good economy

• Phillips Curve

ASSESSMENTS AND ACTIVITIES

Formative Assessment (MCQ's): You will take a formal assessment during class. The assessment will consist of multiple-choice questions and one FRQ from an old AP Exam. Doing the problem of the day and ensuring that you understand it will help you prepare for today's formative assessment and help to ensure that you understand the concepts in this lesson.

Problem of the Day: Work cooperatively with another AP Economics student to construct a response to the following prompt. Complete the response in your notebook, NOTING WITH WHOM YOU WORKED.

• • 1. Define the following terms: Phillips Curve, unemployment, and inflation.

    2. Draw the long-run tradeoff and the short-run tradeoff between unemployment and inflation on one graph.

    3. Suppose the natural rate of unemployment is 6%. On one graph, draw two Phillips curves that describe the four situations listed here.

a. Actual inflation is 5 percent and expected inflation is 3 percent.

b. Actual inflation is 3 percent and expected inflation is 5 percent.

c. Actual inflation is 5 percent and expected inflation is 5 percent.

d. Actual inflation is 3 percent and expected inflation is 3 percent.