Economists Generally Agree That There Is a Short-Run Phillips Curve

question 159

Essay

Economists generally agree that there is a short-run Phillips curve. However, some economists believe that the short-run Phillips curve is steep and that inflation expectations adjust quickly so that the long run is short-lived. What do such beliefs imply about the benefits of using policy to reduce unemployment? What do such beliefs imply about the costs of using policy to reduce inflation?

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Definitions:

Independent Variable

An independent variable is a variable that is manipulated in an experiment to see if it causes a change in another variable.

Multiple Regression Model

A statistical method that explains the relationship between one dependent variable and two or more independent variables.

Dependent Variable

A variable in an experiment or study that is expected to change in response to changes in another variable (the independent variable).

Holding Constant

Holding constant is a method used in analysis where certain variables are kept unchanged in order to isolate the effects of other variables.