Phillips Curve Still Works, but Inputs Have Changed, Rooney Vera Says

The video discusses Jay Powell's economic terms: u star, r star, and π star, which represent the natural rate of unemployment, the neutral rate of interest, and the inflation objective, respectively. It highlights the challenges market participants face when traditional models may not work as expected. The discussion also covers the Phillips Curve, emphasizing that while it is not defunct, its inputs have changed due to structural phenomena, leading to lower equilibrium rates of unemployment and interest.

What do the terms u star, r star, and π star represent in economic discussions?

• Unemployment rate, interest rate, and inflation rate

• Unemployment index, risk-free rate, and inflation index

• Universal rate of growth, standard interest rate, and price stability

• Natural rate of unemployment, neutral rate of interest, and inflation objective

How are policymakers traditionally expected to use economic indicators like u star, r star, and π star?

• As tools for predicting stock market trends

• As benchmarks for international trade

• As guides similar to celestial stars

• As fixed targets for economic growth

What challenge is highlighted for market participants regarding traditional economic models?

• Models are irrelevant to current markets

• Models are too complex to understand

• Models may not work as expected

• Models are becoming more accurate

What is the current understanding of the Phillips Curve according to the transcript?

• It is completely defunct

• It is still valid but with different inputs

• It is irrelevant to modern economics

• It predicts inflation accurately

What has changed in the Phillips Curve's inputs according to the discussion?

• The unemployment rate is higher

• The equilibrium rate of unemployment is lower

• Inflation rates are stable

• Interest rates are higher