The Phillips Curve; How we should learn to cope with low unemployment! Should the prices move to heaven in the clouds in the sky, or just high up in the sky when being here?

source

The Phillips Curve is showing the things as it is showing. When there is much unemployment, and there are many vacant potential employees for different positions, the inflation is low, and when we are having little employment and there are many being employed in the national economy we have with different networks being around in national and international places, there is high inflation in the economy, and therefore we must determine ourselves as a society, how much unemployment we want, and how much inflation we want, and professors in Economics have said that the unemployment should be natural; And what is really natural with unemployment when we want it to be zero, but the prices are rising much up when the unemployment is low, and this is really the trouble of being many people employed in an economy where we are from time to time and from place to place in the spaces we are having at all conceivable places and points where we can be with our human bodies when being alive in the world just as we are selecting where to be, and we are pretty calm and serious, and the life is also funny when being as it is when we are here. And when there is inflation in general, we are both getting higher prices and higher wages, and people are saying that they are just getting more buying power if the wages are rising higher than the prices on the products that one is selecting to be used in the private life and/or in the firms, and/or the public life while we are where we are when being here.

So, what is really this theory about the Phillips Curve? Well, it is showing the prices and the wages in the very short-term run. And The Phillips curve is an economic theory that inflation and unemployment have a stable and inverse relationship. Developed by William Phillips, it claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment, and this means that we should determine ourselves for a level on the unemployment, and accept that this leads to a specific and distinct level on the inflation, and the less we are wanting the unemployment to be, the more the prices and the wages are rising, and hence we should just determine a fixed level on the unemployment and the inflation in relation to increasing prices and wages, and you know, prices can always rise in according to the outcome which are the products in the markets, and we also have an input side of the economy where we are, meaning that the return on the capital and on the labor have a role. But the return of capital is often more stable and fixed that these other inflation factors as the prices on the products, and the wages on the labor force.

The basic model for the Phillips Curve in mathematical expression can be expressed as: πt = πe - β(ut - un), where πt is the actual inflation rate being a part of the profit rate in the business firms in the business life, πe is the expected inflation rate, ut is the unemployment rate, un is the natural rate of unemployment, and β is a positive coefficient reflecting inflation's sensitivity to unemployment deviations. When using this equation, the inflation will increase due to the variables on the right side of this equation, and hence, the higher the expectations for the inflation, the higher is the inflation, and when the unemployment is getting higher in the term ut in the equation, this means that the inflation rate is being less. And there is the opposite logic if the inflation is getting lower, and when prices are low and wages are low, we are still getting the expectations of the profit to be lower, and low inflation means that ut i getting higher, and therefore the equation above is like it is, and hence we can model many relations in the terms of the economies that are happening while we are here and there, and much Macro Economics is about real sizes on the levels of the variables and the factors we are having around us when being here.

So, what if the economists are making wrong assumptions or wrong beliefs about the development of the economy in question? Well, we cannot be sure about anything, and since the Phillips Curve is measuring the short-term effects in an economy, we have no recipe or no solution for what will happen in the long run. And the natural rate of unemployment is often fixed as a size in an economy asking each other about how much unemployment that are natural and should be accepted and respected in any country while being where we are and have been.

Please do follow if you want to keep up with my next article. Any upvotes or resteems are hugely appreciated!

Latest article, check out :
The history of music artists; The case of Ozzy Osbourne!

Sverre Larsen

Kristiansand, Norway

Read about us? // Main page!