Advanced Economic Analysis (HSC SSCE Economics): Flashcards

Low inflation & low unemployment hard to achieve together

High inflation alongside high unemployment & stagnation

Baseline unemployment in healthy economy (frictional+structural)

Vertical line at natural rate of unemployment ($U_n$)

Workers/firms anticipate inflation & adjust, creating it

When temporarily higher unemployment becomes permanent

Only accounted for demand-pull, ignored cost-push inflation

Only permanently higher inflation, no lasting unemployment cut

$2-3\%$ annual inflation

Supply-side & microeconomic policies, not demand management