Aula Teórica nº 16. Figure 1 The Phillips Curve. O trade off de curto prazo entre inflação e desemprego. Inflation Rate (percent per year)

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1 ula Teórica nº 1 O trade off de curto prazo entre inflação e desemprego Figure 1 The Phillips Curve (percent per year) 7 (percent) 1

2 Figure How the Phillips Curve is Related to ggregate Demand and ggregate Supply (a) The Model of ggregate Demand and ggregate Supply (b) The Phillips Curve Price Level 1 Short-run aggregate supply (percent per year) 1 7,5 ( is 7%) 8, ( is %) High aggregate demand Low aggregate demand Quantity of Output (output is 8,) 7 (output is (percent) 7,5) Figure 3 The Long-Run Phillips Curve Long-run 1. When the Fed increases the growth rate of the money supply, the rate of increases... High Low.... but remains at its natural rate in the long run. Natural rate of

3 Figure How the Phillips Curve is Related to ggregate Demand and ggregate Supply (a) The Model of ggregate Demand and ggregate Supply (b) The Phillips Curve.... raises the price level... Price Level P P Long-run aggregate supply 1. n increase in the money supply increases aggregate demand... Natural rate of output D ggregate demand, D Quantity of Output.... but leaves output and at their natural rates. Long-run Phillips curve and increases the rate... Natural rate of Figure 5 How Expected Shifts the Short- Run Phillips Curve.... but in the long run, expected rises, and the short-run shifts to the right. Long-run C 1. Expansionary policy moves the economy up along the short-run... Natural rate of Short-run with high expected Short-run with low expected 3

4 Figure The Phillips Curve in the 19s (percent per year) (percent) Figure 7 The reakdown of the Phillips Curve (percent per year) (percent)

5 Figure 8 n dverse Shock to ggregate Supply (a) The Model of ggregate Demand and ggregate Supply (b) The Phillips Curve and raises the price level... Price Level P P Y Y S ggregate demand.... lowers output... ggregate supply, S 1. n adverse shift in aggregate supply... Quantity of Output.... giving policymakers a less favorable tradeoff between and. PC, PC Figure 9 The Supply Shocks of the 197s (percent per year) (percent) 5

6 Figure 1 Disary Monetary Policy in the Short Run and the Long Run Long-run 1. Contractionary policy moves the economy down along the short-run... C Short-run with high expected Short-run with low expected Natural rate of.... but in the long run, expected falls, and the short-run shifts to the left. Ideias-chave curva de Phillips descreve uma relação negativa entre inflação e desemprego Expandindo (contraindo) a procura, o decisor político pode escolher um ponto da curva de Phillips com maior (menor) inflação e menor (maior) desemprego. O trade off expresso na curva de Phillips apenas se verifica no curto prazo. curva de Phillips de longo prazo é vertical. curva de Phillips de curto prazo pode deslocar-se devido a choques da oferta. Um choque adverso da oferta proporciona um trade off entre inflação e desemprego menos favorável. Quando o banco central contrai o crescimento da massa monetária para reduzir a inflação, a economia desloca-se ao longo da curva de Phillips de curto prazo e o desemprego aumenta. O custo em desemprego da desinflação depende da velocidade de evolução das expectativas de inflação.