I asked my lecturer about philip curve in the question about Keynesian. In my understanding, the philip curve should be vertical. And this is the explanation.
Dear Reni,
You are correct - in the New-Classical case there is immediate and rational adjustment. This means that the Phillips Curve is not downward sloping (as in the graph) but a vertical line (at the NAIRU u*). The graph shows the general case - but when one applies the New Classical logic, then one should read the graph in this particular way, i.e. having a vertical Phillips Curve.
The meaning of a vertical Phillips Curve is that there is (in the New Classical case) NO trade-off between unemployment and inflation. The downward sloping Phillips Curve implies that one can have - at least in the short run - lower unemployment (u < u*) in exchange for a higher inflation (and the risk of accelerating inflation). With a vertical Phillips Curve there is no such trade-off and any situation in which u < u* would mean run-away inflation (along the vertical Phillips Curve).
Dear Reni,
You are correct - in the New-Classical case there is immediate and rational adjustment. This means that the Phillips Curve is not downward sloping (as in the graph) but a vertical line (at the NAIRU u*). The graph shows the general case - but when one applies the New Classical logic, then one should read the graph in this particular way, i.e. having a vertical Phillips Curve.
The meaning of a vertical Phillips Curve is that there is (in the New Classical case) NO trade-off between unemployment and inflation. The downward sloping Phillips Curve implies that one can have - at least in the short run - lower unemployment (u < u*) in exchange for a higher inflation (and the risk of accelerating inflation). With a vertical Phillips Curve there is no such trade-off and any situation in which u < u* would mean run-away inflation (along the vertical Phillips Curve).
Tidak ada komentar:
Posting Komentar