Macro Unit 3, Question 13: The Phillips Curve

The video explains the Phillips Curve, highlighting the differences between the short run and long run. It discusses how aggregate demand and supply shifts affect inflation and unemployment, leading to inflationary and recessionary gaps. The short run Phillips Curve shows an inverse relationship between inflation and unemployment, while the long run curve is vertical, indicating no relationship. Changes in aggregate demand and supply cause shifts in the Phillips Curve, illustrating economic conditions like inflationary and recessionary gaps.

What is meant by an inflationary gap in the context of the Phillips curve?

Describe the effects of a leftward shift in the aggregate supply curve on the Phillips curve.