Draw the graph · Macro · Phillips curve
A recession hits
Drag a curve sideways, or use its arrows. A curve you do not move is a curve you are saying stays put.
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Short-run Phillips curve stays put. Long-run Phillips curve stays put.
A fall in aggregate demand moves the economy along the short-run Phillips curve. Unemployment rises above the natural rate and inflation falls, but the curve does not move because expected inflation is unchanged. The long-run Phillips curve is also unchanged.
Unemployment rises and inflation falls along the unchanged short-run Phillips curve.
Common mistake. Students often shift the SRPC left to 'show lower inflation.' A recession is a movement along the SRPC, down and to the right. The curve shifts only when expectations or supply conditions change.
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Lesson: The Phillips Curve