REFLECTION 22

Describe the short run trade-off between inflation and unemployment.  Why is there not a long-run trade-off?  How long do you think the short-run lasts? (Or do you believe there is a trade-off at all – many economists don’t.  Why?)
The short run trade-off between inflation and unemployment is if there is inflation, unemployment lowers. The Philip curve proves that there is trade-off between inflation and unemployment. With a higher demand in product, firms raise their prices which results in a higher demand for employment. There is no trade-off in the long run between inflation and unemployment. Consumers will stop purchasing and unemployment will go back to normal rate. It also depends in the time period. The trade-off could last for almost two years. If there is a lower wages or higher interest rate then consumers might purchase less goods, and if they purchase less, the demand for employees will decrease.