debate: stagflation or phillips curve theory on short answer questions? (2 Viewers)

[aditya]

no you could describe it as delayed.... as wage expectations decreased the inflation rate dropped....

i think the trick there was the fact that cpi was rising but that in fact the infltaion rate wasnt...

 

[Acid]

OMG - Of course the inflation rate rose between year 1 and year 2 - it was bloody 0 in year one. You look at the Year 1 - Year 2 figure, and then the Year 2 - Year 3 figure, which indicates that inflation is decreasing and unemployment is increasing - and if you want you can say this is illustrated by the Phillips Curve.

 

[skypryn]

Rising Unemployment
Rising Inflation

Seems like stagflation to me

OMG stop trying to convince yourself. OK here is how it works:

YEAR CPI
1 100
2 102
3 103

OK now let me first make it clear that inflation NEVER rises! It beigns at 2% then falls in the next year. just because year one has a base index of 100, doesn't mean 2% is a rise - there is no rise from an inexistent statistic (ie. there is no year '0')

so - here is the optimum answer. Phillip's curve does describe falling rate of inflation and rising UE. no question. you may get SOME marks for answering stagflation, but having said that it is not correct.

 

[matt_f64]

Rising Unemployment
Rising Inflation

Seems like stagflation to me

except inflation wasnt rising u twit... if u hadnt notice that as u go along the curve, inflation falls obviously.. how can anyone get this kind of question wrong...

 

[matt_f64]

But the point is this economy had a rising unemployment rate even though the inflation rate was going both up and down. Therefore neither the conventional phillips curve or stagflation could explain the trends in the economy of this period.

how is the inflation going up AND down... u dont no the inflation rate in year 1 cos there is no base year 0 or wateva... u only no that in year 2 inflation is 2%, then in year 3 inflation is about 1%... that seems to me that inflation is falling as 1 is a smaller number then 2.....

 

[skypryn]

how is the inflation going up AND down... u dont no the inflation rate in year 1 cos there is no base year 0 or wateva... u only no that in year 2 inflation is 2%, then in year 3 inflation is about 1%... that seems to me that inflation is falling as 1 is a smaller number then 2.....

yeah good this man knows what he's talking bout

also, my initial reaction was stagflation, filled out whole answer then realised my stupidity in just looking at directino of CPI. so i changed my whole answer. so i have SOME sympathy for those who made the critical error of ever stating that inflation was rising...

 

[Shuter]

I actually never really looked at the inflation rate I was just going off what some other people said. I describe mine all in words and didn't apply and specific theories too it but still explained why the relationships were existing between unemplayoment and CPI.

 

[skypryn]

But the point is this economy had a rising unemployment rate .

BAAAAAAAAAAAA. next contestant please

 

[Acid]

LOL spypryn and matt_f64.. what's the point of repeating what I've just said 5 mins ago.

Shuter: What happened to you being headed for a definite top in the state? Karma bitch...jokes

 

[sub]

hey so describing it in terms of the phillips curve isnt wrong? well i should atleast get some for stating that

 

[Shuter]

BAAAAAAAAAAAA. next contestant please

Waah? maybe I'm not remembering the question correctly. I thought this was the one where it was 5% then 10% then 15% unemployment. Or are we talking about the graph one? I'm so confused.

 

[matt_f64]

i think we r talking about hte one where u/n goes 5% 10% then 15%... and inflation goes from year 1 is unknown, year 2 is 2% year 3 is 1% and so the economy is in a downturn. no stagflation at all

 

[Shuter]

Yep, that's what I thought? Why did he say I was wrong then?

 

[matt_f64]

But the point is this economy had a rising unemployment rate even though the inflation rate was going both up and down. Therefore neither the conventional phillips curve or stagflation could explain the trends in the economy of this period.

look at wat u said.. i think u mite hav not meant to say that? cos ur saying inflation went UP and DOWN.. wen all we no is that it went down (while unemployment went up) therefore phillips curve.

 

[Shuter]

look at wat u said.. i think u mite hav not meant to say that? cos ur saying inflation went UP and DOWN.. wen all we no is that it went down (while unemployment went up) therefore phillips curve.

Oh yeah I was just basing that off what others were saying in the forum about the rate going up and down. In my actual answer I rather just refered to the inflation rate being quite low = low economic activity = cyclical unemployed rising or similar, I can't really remember.

 

[Rorix]

i think the marks would be something along the lines of 1 mark for identifying whats going on, 1 mark for naming Phillips curve, 1 mark for further information (i.e. some sort of explanation of why)

 

[matt_f64]

i dont think u even hav to name the phillips curve so long as u identify the trends of u/n going up and inflation goin down. and then add why.

 

[Mannix]

inflation was still there, but the rate of the increase in prices was decreasing.

So it wasnt deflation, but inflation was decreasing.

The dictionary defines stagflation as Sluggish economic growth coupled with a high rate of inflation and unemployment.

I dont think there was a high rate of inflation.

Still im not a marker!

 

[Rorix]

i dont think u even hav to name the phillips curve so long as u identify the trends of u/n going up and inflation goin down. and then add why.

yeah that should be fine too

 

[mushroom_head]

So we all agree that it wasn't stagflation, since it is both rising unemployment and inflation?


.....GOOD! that means i got something right for once!