Summary of the phillips curves, Macroeconomics

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Summary of the Phillips curves

In neo-classical synthesis, augmented Phillips curve is known as the short-run Phillips curve. It is presumed to be stable as long as expectations of future inflation don't change. To summarize, we have three Phillips curves: 

 

  • Traditional Phillips curve. ΠW = f(U) and same downward sloping relationship applies to both the short and the long run.
  • Short-run Phillips curve (SPC). Πw = f(U) + Πe and curve is valid only in the short run (SPC = Short-run Phillips Curve).
  • Long-run Phillips curve (LPC). Πw = ΠM, U = UN and there is not any relationship between Πw and U (UN is natural rate of unemployment).

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