Macro Econ Homework Help!

Question

Please check out the graph on the link.

http://i33.tinypic.com/jv4w3r.jpg

I do not understand how the Phillips curve works!

Answer 1

For aggregate supply you need price level (by vertical axis) and output (on horizontal axis)

http://www.unc.edu/depts/econ/byrns_web/...

For Philips curve ( http://en.wikipedia.org/wiki/Philips_cur... )you need inflation rate on vertical axis (can be calculated from changes in price levels) and unemployment rate (by horizontal axis).

http://content.answers.com/main/content/...

Table will look something like that:

Price level .. RGDP . Unempl % Inflation %

....102 ....... 8.0 ........... 9 ........... 2

....104 ....... 8.1 ........... 7 ........... 4

....106 ....... 8.2 ........... 5 ........... 6

....108 ....... 8.3 ........... 4 ........... 8

....110 ....... 8.4 ........... 3 .......... 10

This part is required for Aggregate supply:

Price level . RGDP

....102 ........ 8.0

....104 ........ 8.1

....106 ........ 8.2

....108 ........ 8.3

....110 ........ 8.4

This part is required for Philips curve:

Unempl-%  Inflation %

...9 ........... 2

...7 ........... 4

...5 ........... 6

...4 ........... 8

...3 .......... 10

At the end it should look something like that:

http://i306.photobucket.com/albums/nn270...