The Long Run Philips Curve (LRPC)

• Because the LRPC exists at the Natural Rate of Unemployment (Un), structural changes in the economy that affect Un will also cause the LRPC to shift with increases to the right and decreases to the left

Short Run Philips Curve

• Increases in AD = Up/Left movement along SPRC

• SRAS right = SRPC left which signals changes in taxes, subsidies, etc...

Stagflation: A period with high inflation and high unemployment at the same time

• Examples: After Vietnam, Oil Embargo of 1973/1979, Baby Boomers, Women's Movement could go into recession

Disinflation: A reduction in the inflation rate from year to year, nominal wages increases

Deflation: A situation in which there is an actual drop in the price level, opposite to Inflation