Learning objectives
Explain the short-run Phillips curve (SRPC) as the inverse relationship between inflation and unemployment implied by movements along the SRAS curve
Show that a shift in AD is a movement along the SRPC, while a shift in SRAS or a change in inflation expectations shifts the SRPC
Explain why the long-run Phillips curve (LRPC) is vertical at the natural rate of unemployment, and what shifts it
Analyze the effects of fiscal and monetary policy on the economy's position on the SRPC and LRPC in the short run and the long run
State the quantity theory of money (MV = PY) and explain why, with velocity and real output stable, sustained money growth causes inflation
Explain the long-run neutrality of money: a rise in the money supply raises the price level and nominal values in the long run without changing real output, employment or the real interest rate
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