Phillips Curve (1 Viewer)

[mandalay]

can anyone tell me how the 'Phillips Curve' relates to the impact of labour market institutions on the demand for, and supply of, labour in the Australian economy???

pleeeeeeease??

 

[santaslayer]

Phillips curve is a grahical represenation of the trade off between inflation and unemployment. Usually, the higher the inflation, the the lower the unemployment and vice versa. That is why the governments main policy is inflation targeting. Once inflation and unemployment rise together, it is termed as stagflation. Deflation is happening in Japan atm.

 

[mandalay]

so technically it doesn't have much to do with supply and demand? :S

i'm a little confused lol

 

[i-color]

ok phillips curve says that there is a short term trade off between unemployment and inflation, which means to achieve a lower unemployment rate, you have to have higher inflation. The NAIRU is basically the unemployment rate which does not threaten inflation.

However, due to effective govt policies targeting low inflation as well as micro reform and structural change, we are able to achieve a lower rate of unemployment without threatening an increase in inflation. ie, we can achieve a lower une rate without inflation spiraling upwards (which is the trend shown in the phillips curve)

this doesn't affect demand and supply as such, but it affects what the NAIRU is.....so right now, we can achieve a lower NAIRU without inflation sprialling upwards

 

[mandalay]

ok so the phillips curve may not really affect demand & supply... but it does incoporate umemployment... and doesn't THAT affect demand and supply?

as in, the fewer amount of people working, the less that will be 'supplied'?

right? :S *sniffle*

 

[mandalay]

*sigh* i'm just trying to fit the 'Phillip's Curve' concept into my essay >.< but i don't think it'll work... i hope it's not too irrelevant i need at least one theory...