@MILMAG1 He explains it using an ad/as model. With an increase in AD both the price level and Real GDP increases, it also creates an inflationary gap. Workers expect and demand higher wages and thus cost for firms increases as well. But in the long run (sic) it all returns to NAIRU or natural rate of unemployment
@MrWycombewanderers Thanks for your comment. The only way that demand for labor can increase via price inflation is if workers are bound by nominal wage contracts which make the real labor cost lower. But nothing has been said about the other costs that the firms has, which are surely affected adversely by price inflation immediately.
Am not an expert(you seem to be one) but i think you made a mistake by telling that ''even existing workers are made to work extra time'' will result in a decrease in unemployment. by definition unemployment is a situation whereby those willing and able to work cannot find a job at the given wage-rate. I can't find any relationship in what you are saying
All this complicate mathematical formules are invented to exploit the poor so he can't understand how they are cheating him, the fact his that the reality of the things is very simple. The economy is a lie just by the fact that corporations are eploiting poor countries to obtian raw materials.
good video but i hav a cnfusn, as we shift the srpc curves rightward doesnt the NAIRU also shift to higher levels altogether and if this is so then doesnt the lrpc also shift towards right? plz answer urgent. possibly today.
Fantastic video. However, the one thing that i don't entirely get is the about the shifting of the SRPC curve. I get why the economy will move from point A to point B on the curve (in the video from approximately 6 mins onwards) but i don't get how it can move back down to point A or across to point C. I understand the concept of money illusion, so maybe i'm just being stupid, but any explanation would be welcome. Cheers.
Thank you for this. As a prof with a background in IB, I get students, friends, and family fussing about things, and skewing things out of proportion and spinning politics. This is a great example of classic economic theory and testing.
@AntiVenomFangX not exactly. It is true, that higher price levels if fully appreciated by labour may in turn increase wages, assuming trade bargaining power of labour. However, if there is no bargaining power from labour, e.g. no trade unions, then their real wage may decrease or if employers do not traslate the increase in price levels onto the wages paid to their employees.
Wasn't this disproven by the 1970's stagflation? There are also historical examples in the 1880s of falling prices with high employment levels (Americas Gilded Age).
How is the premise that inflation and unemployment being mutual exclusive hold true then?
I listened to Robert Kiyosaki's advice on silver: "I believe this is the biggest investment anyone can make in the next 100yrs" I did my research and found an opportunity that has changed my life in 12 months. Take a look like i did.... Visit: goldsave.co/
Using the Expectations-Augmented Phillips Curve, if the Government wants to reduce unemployment AND inflation it has to reduce AD? So reducing both problems is possible?
@ichariley think abut it, your dealing with people who will be unwilling to take a nominal wage cut because they are ignorant ofthe fact it is a nominal wage cut, ergo sticky wages. Additionally, some people may have reservation wage, i.e. a minimum level of wages they are willing to work for. If wages fall below this level some people may not be willing to work and thus unemployment increases.
Thanks very much, very useful. Only two points though to consider 1. why not make initial NAIRU sit at something other than 0% inflation, I think it would make it easier to understand. 2. It would also help to point out that Friedman's critique that led to this curve concluded that inflation would keep rising in a sort of ratchet effect, you touch on it briefly at the end but it's a critical point. I only comment because this is a VERY helpful video, thanks for making it!
The Phillips Curve is a joke. I have no idea why it is still taught in economics courses this day in age. It has been dis proven since it's foundation, yet professors still teach it to aspiring scholars. What a joke!
@jumpoutatree If you want to learn real economics, then disown the Phillips curve! There are a lot of economists who agree that this day in age the Phillips curve is irrelevant. HIstory proves the theory wrong, no matter what some have tried to prove using mathmatical models.
This is awesome for last minute revisions! Very clear and concise. It's the only thing that made me understand, finally, what the Long run Phillips Curve is. Thank you!
@khoshgelak07 probably because of stagflation in the 70's (also happened in the U.S.) when inflation and unemployment rose together steeply which is something that you cannot see on the phillips curve.
@bonfirejovi The guy more or less mentions it near the end. Stagflation happens when the long term equilibrium is set at a high rate of inflation, and you also have a recession. That's what happened in the 70s: People expect inflation to be high, so workers negotiated large yearly increases in their pay, even though demand for goods was low so unemployment was high. Inflation would have been even higher if unemployment was lower.
Hmm see at around 5:40... what you were explaining my teacher referred to as the "natural rate" theory.... with adaptive and rational expectations.. and I think he put it under the Keynesian model... just realized that. Thank you.
[...] But if you go back to the original article by Phillips, he never demonstrates that such a thing exists in the real world. He manipulated and maneuvered the data around to make it look as if there was one. Once his errors are swept away, and the data broken down, the Phillips Curve vanishes as any kind of long-run pattern. It didn't take stagflation to teach us that. It was always untrue. by Jeffrey Herbener (from wikipedia)
You are a savior...I have the worst ECON teacher ever and I've had to teach myself the whole semester...your videos help so much...just to get a jist of what we're being taught; on the homework last class i had to convince him that one of his questions was wrong, he claimed that "according to Keneysian models the AS curve is downward sloping"...
See if you are at point 'B' in the video you are under the NAIRU..
While you are moving to point 'C' an EXOGENOUS supply shock (e.g. a rise in oil prices like in the 70s) causes the new SRPC to shift outwards further away point 'C' to say at point 'D' above 'C' in the LRPC.
Since you were below the NAIRU and are now moving towards it, you'll have increasing unemployment.
And since you are also moving to point 'D' in the LRPC you'll have higher inflation too.
You should read Milton Friedman's work about why the Phillips Curve is not accurate, he did when a Nobel because of it. The big difference is artifical growth (stimulous) vs natural growth (real growth in an economy). Bernanke doesn't understand the Phillips Curve is not accurate when the government is creating artifical 'growth' in the economy. It's not the same ball game even.
@rosiecao pajholden is correct in explaining the Phillips Curve, but it the Curve itself was disproven to be accurate in the 1970s. In the 70s we had both high unemployment and high inflation. Please discover Peter Schiff and the Austrian macro economic policies as taught by Ludwig Von Mises.
If LRPC shifts to the left, we get a decrease in unemployment and an increase in price level. That means Aggregate Supply increases. A supply side policy to increase AS would be to subsidize businesses or deregulate
Keynes and Phillips will not teach you correct supply side macro economics. You need to study Ludwig Von Mises and Austrian economics if you want proper supply side macro.
Actually, NAIRU doesn't have to be zero, just constant and unchanging at this level of unemployment. On higher short run Phillips Curves inflation is constant at this rate of unemployment, but not zero. In other words prices are rising, but at a steady rate.
Would the point NAIRU also be at pareto optimality? I picked up that it was equilibrium as soon as I thought about it, and obviously if unemployment falls (good), inflation rises (bad)
As you said, mutually exclusive. Can't get everything we want.
The relation between unemployment and inflation is simply observable in normal phase of growth economy...simply statistic. When the economy decrease probably the bargaining of the union create a strong resistence to the down.
This comment has received too many negative votesshow
All lies. Inflation is because of the greedy and high debts. So are taxes when taxes fall on the poverished. Especially when only the rich can afford to find the loop holes. So feed someone else these lies.
You are right at the point of inflation and relation to debts. I do not thing that the Philips curve is used in that way. A increase in consumer debts = lower cost of borrowing. This stimulates autonomous consumption thus GDP and shifting AD to the right. Taxes are required as ppl become effluent, they would spend on imports more than local goods. If Import increase more than your C+G+I+X, you will face AD shift to the left resulting in recession. Btw, are you a econs major?
What affect does the minimum wage have on this? Does it work without a minimum wage? Does the minimum wage screw it up? In the US, since the 70s, prices have been skyrocketing for everything except labor. Wages have not gone up at all, and have even been depressed in recent years. The real unemployment numbers have been hidden for decades, and the jobs that are left are of very poor quality.
Reemeber that there can be a wide gulf between A-Level economics and real-world economics. That's not to do A-Level economcis down but it just means that you should remember that the real world is more nuanced. Minimum wages are a perfect example. In A-level theory, tehy increase unemployment. In the real world the opposite can often occur.
depends how socialistic is economy, I am living in Denmark where unions have very strong bargaining power (minimal wage per hour is around $20) Economy is working just like in the model ceretis paribus
minimum wages can have three effects. It can Increase in the price of the products or services offered by a company (this is to offset the extra cost). It can decrease the amount of hours for every worker, or cut workers in general increasing the unemployment rate
Thanks very much for the video. I'm current trying to revise for a Macro exam, this had me utterly confused whenever i'd tried to understand it via text or others explaining it, but now I understand perfectly!
this video really cleared a lot of things up for me,
keep it up! thank you.
real vs nomial:
real wages take into effect inflation, so workers will take the current inflation/prices in the economy as the new base and demand accordingly.
nominal wages would be that workers are not adaptive and rather than demanding a raise according to the new prices throughout the economy (like the real wage) they rather insist on only an increase based on their previous wage, regardless of what the inflation is
@nadnerb09 Real wages do NOT keep up with real inflation levels. This is why the middle class and the poor are going backwards. The wealth not so much since they know how to invest properly to fight inflation better than the middle class and poor. The Phillips Curve is more about that either you can have high inflation and low unemployment or low inflation and high unemployment, but that you can never have low inflation and low unemployment or high inflation and low unemployment.
my understanding of it is, nominal means the current year(not looking at previous years for things such as PI(price index) or inflation
real is based off previous years so you would have to incorporate those aspects. like in the video at around, 6:00 , he says that if the workers want a real wage increase they would have to ask for a % increase of higher than the projected inflation
I have one question though: this model only takes unemployment up to its natural rate into account. What's the relation between unemployment and inflation when the unemployment rate is actually higher than it would naturally be (because of, for example, a severe economic depression)?
You should understand that economic depression or whatever fenomena it is - has impact on aggregate supply and demand. Use AD/AS model to understand the movement in market. Movement of demand (wether it's just small, temporary or huge depression) changes the situation along Phillips curve, however changes of supply shifts the curve up and down. Consider X-axis of AD/AS as employment and Y-axis as inflation.
just a very quick question, you say that as there is a nominal increase in aggregate demand and "existing workers are made to work extra time" how would that decrease unemployment?
Your lectures proved very helpful to me in my studies. u r a nice teacher, ur knowledge of the subject and ur communication skills are perfect. Plz upload some more of ur lecture on micro and macroeconomics. THANK YOU!!
Can someone please tell me what the labels are on the vertical and horizontal axes of the final graph? I can't see them. Around the 8:45 minute mark, he says that classicists would recommend a cut in AD, I assume to reduce inflation, which would mean a higher unemployment rate, but I have no idea what the labels of either axis is, so I can't tell what what we would be reducing on the vertical axis in order to do this.
Hi. It says "inflation". My handwriting is challenging, I know. Opinion is divided on the matter: I consider it to be idiosyncratic and full of character. All my pupils think it is dreadful and bordering on illegible. Comments I write on their papers are most easily read by pinning the paper on a wall then reading it as you run past... hope it didn't spoil the video. Phil Holden
great video!!!!
MenziFanclub 1 month ago
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mamba1066 1 month ago
If only I had you as a teacher! Loving the simplistic approach to complicated theory!
tarooqii 3 months ago
What's the difference between short term and long term?
cinqueottavi 3 months ago
This is nonsense!! There is no such trade-off. Why would unemployment fall if costs for firms rise? This makes no sense.
MILMAG1 4 months ago
@MILMAG1 He explains it using an ad/as model. With an increase in AD both the price level and Real GDP increases, it also creates an inflationary gap. Workers expect and demand higher wages and thus cost for firms increases as well. But in the long run (sic) it all returns to NAIRU or natural rate of unemployment
MrWycombewanderers 2 months ago
@MrWycombewanderers Thanks for your comment. The only way that demand for labor can increase via price inflation is if workers are bound by nominal wage contracts which make the real labor cost lower. But nothing has been said about the other costs that the firms has, which are surely affected adversely by price inflation immediately.
MILMAG1 2 months ago
Thanks a lot ! your explanation is great .)
masguapacallada 5 months ago
Am not an expert(you seem to be one) but i think you made a mistake by telling that ''even existing workers are made to work extra time'' will result in a decrease in unemployment. by definition unemployment is a situation whereby those willing and able to work cannot find a job at the given wage-rate. I can't find any relationship in what you are saying
avnish232 6 months ago
All this complicate mathematical formules are invented to exploit the poor so he can't understand how they are cheating him, the fact his that the reality of the things is very simple. The economy is a lie just by the fact that corporations are eploiting poor countries to obtian raw materials.
iperman68 7 months ago
@iperman68 So you're saying poor people are stupid? Wow, conspiratorial AND paternalistic at the same time, what an accomplishment!
Your guitar clips are sweet, though. Stick to shredding and stay out of public policy wonkery, please :)
ConscientiousMind 4 months ago
This is brilliant! pajholden what a legend.. A-Level economics made not easy as such but m ore accessible!
vermillionR 7 months ago
I learned more in these 10 minutes of video than in 45 minutes of economics class in school.
Jankstas 7 months ago 3
I wonder why I pay tuition fees..everything I learn in university is explained on the internet..way better than in class
thanks for all your videos
viavo 7 months ago 15
@viavo
Reason why you go to university is just to get the paper that you know something about economics:P
Hokrollo1 2 months ago
Good job
puley124 7 months ago
Phillips was from New Zealand! Yeah baby!
Tehui1974 7 months ago
7:51 hahaha you said "Non Inflationnary" instead of "Non accelerating" and cut the video. No probs btw great videos :P
milesjordan239 8 months ago
good video but i hav a cnfusn, as we shift the srpc curves rightward doesnt the NAIRU also shift to higher levels altogether and if this is so then doesnt the lrpc also shift towards right? plz answer urgent. possibly today.
Talalx17 8 months ago
thanx. May Allah bless u long peaceful life with sound health.
5zainab11 8 months ago
Shouldn't point C be higher up on the LRP-curve instead of next to point B?
Since, if wages get higher, (SR) aggregated supply goes up where it meets the risen (SR) aggregated demand on the LRAS, causing higher inflation.
JulienLaatst 8 months ago
i love you. Nuff' said. life saver
4noory 8 months ago
Paj you hero.
mozza6757 8 months ago 2
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mozza6757 8 months ago
THANK YOU VERY MUCH. VERY HELPFUL!!
jiggaman339 8 months ago
Great video man, I guess 13 didnt pass their exam? =)
viancon 8 months ago
Fantastic video. However, the one thing that i don't entirely get is the about the shifting of the SRPC curve. I get why the economy will move from point A to point B on the curve (in the video from approximately 6 mins onwards) but i don't get how it can move back down to point A or across to point C. I understand the concept of money illusion, so maybe i'm just being stupid, but any explanation would be welcome. Cheers.
ArcticoFoxx 9 months ago
VERY COOL thanks mate!
CookaChicken 9 months ago
GREAT VIDEO ....had to watch it a couple times though to properly grasp concept
mrsgiggles85 9 months ago
lege
agitari740 9 months ago
Simply Brillaint !
Thank you for the great work that you are doing. Keep up the spirit of teaching !
Kind Regards
probasu 10 months ago
this guy makes me passionate about economics. i was on the verge of putting my head in a gas oven because my textbook is so boring.
mpdp85 10 months ago 31
The middle class also has pernicious taxation as the demon on their shoulder along with all of the other costs of living.
cdw100 1 year ago
You sir, are a fuckin bad ass!
Cliffs0fDover 1 year ago
you're amazing :)!
saraahxhc 1 year ago 5
Thank you for this. As a prof with a background in IB, I get students, friends, and family fussing about things, and skewing things out of proportion and spinning politics. This is a great example of classic economic theory and testing.
PhdBlonde 1 year ago 4
@PhdBlonde Thank you - I enjoy the theory for its own sake!
pajholden 1 year ago 2
wages and inflation are the same thing?
AntiVenomFangX 1 year ago
@AntiVenomFangX
Wages are = prices of labour
and if prices increases, labour increases as well
Wages = prices of labour = prices = inflation
H20splashX 1 year ago
@AntiVenomFangX not exactly. It is true, that higher price levels if fully appreciated by labour may in turn increase wages, assuming trade bargaining power of labour. However, if there is no bargaining power from labour, e.g. no trade unions, then their real wage may decrease or if employers do not traslate the increase in price levels onto the wages paid to their employees.
notoriousvak 11 months ago
Thanks for the explanation.
veryvalea1 1 year ago
This man is a genius
Kinz581 1 year ago
Wow thank you. It finally makes sense!
PrincyxStar 1 year ago
Wasn't this disproven by the 1970's stagflation? There are also historical examples in the 1880s of falling prices with high employment levels (Americas Gilded Age).
How is the premise that inflation and unemployment being mutual exclusive hold true then?
causeimthesquid 1 year ago
thx a lot for this video :D mr Holden
from Chile
elmanolosemurio 1 year ago
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I listened to Robert Kiyosaki's advice on silver: "I believe this is the biggest investment anyone can make in the next 100yrs" I did my research and found an opportunity that has changed my life in 12 months. Take a look like i did.... Visit: goldsave.co/
Efficacious24 1 year ago
I have a question. :)
Using the Expectations-Augmented Phillips Curve, if the Government wants to reduce unemployment AND inflation it has to reduce AD? So reducing both problems is possible?
ichariley 1 year ago
@ichariley reducing AD will reduce inflation but will INCREASE unmeployment
lankyspotamus 1 year ago
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@ichariley reducing AD will reduce inflation but will INCREASE unemployment
lankyspotamus 1 year ago
@ichariley think abut it, your dealing with people who will be unwilling to take a nominal wage cut because they are ignorant ofthe fact it is a nominal wage cut, ergo sticky wages. Additionally, some people may have reservation wage, i.e. a minimum level of wages they are willing to work for. If wages fall below this level some people may not be willing to work and thus unemployment increases.
notoriousvak 11 months ago
thanks...helpful vid for macro-students.
MrAMerang 1 year ago
Thanks very much, very useful. Only two points though to consider 1. why not make initial NAIRU sit at something other than 0% inflation, I think it would make it easier to understand. 2. It would also help to point out that Friedman's critique that led to this curve concluded that inflation would keep rising in a sort of ratchet effect, you touch on it briefly at the end but it's a critical point. I only comment because this is a VERY helpful video, thanks for making it!
jvanweert 1 year ago
thank you so much!!honestly, you have no idea how your how much your videos helped me!! :D
shivissar 1 year ago
The Phillips Curve is a joke. I have no idea why it is still taught in economics courses this day in age. It has been dis proven since it's foundation, yet professors still teach it to aspiring scholars. What a joke!
LibertyMike1 1 year ago
@LibertyMike1 Why don't you take your Lew Rockwell propaganda somewhere else? This is for people who want to learn real economics.
jumpoutatree 1 year ago
@jumpoutatree If you want to learn real economics, then disown the Phillips curve! There are a lot of economists who agree that this day in age the Phillips curve is irrelevant. HIstory proves the theory wrong, no matter what some have tried to prove using mathmatical models.
LibertyMike1 1 year ago
@LibertyMike1 we all learn from mistakes.
notoriousvak 11 months ago
thank you so very much :)
WHYamiSANE 1 year ago
This is awesome for last minute revisions! Very clear and concise. It's the only thing that made me understand, finally, what the Long run Phillips Curve is. Thank you!
zave94755 1 year ago
Hey guys, why hasn't the Phillips curve been right for the UK in recent years? Does that make sense lol
khoshgelak07 1 year ago
@khoshgelak07 probably because of stagflation in the 70's (also happened in the U.S.) when inflation and unemployment rose together steeply which is something that you cannot see on the phillips curve.
Conneisseur2 1 year ago
Comment removed
reenz1231 1 year ago
Fantastic! I wish everyone on YouTube that watches economics videos would check this one out!
crambo0349 1 year ago
how does it account for stagflation?
bonfirejovi 1 year ago
@bonfirejovi The guy more or less mentions it near the end. Stagflation happens when the long term equilibrium is set at a high rate of inflation, and you also have a recession. That's what happened in the 70s: People expect inflation to be high, so workers negotiated large yearly increases in their pay, even though demand for goods was low so unemployment was high. Inflation would have been even higher if unemployment was lower.
crambo0349 1 year ago
brilliant!
MrDankeil 1 year ago
Cheers thats really helpful. If my lecturer made it half as clear as you, I might stand a chance of doing well at this exam!
CJBarnes13 1 year ago
Hmm see at around 5:40... what you were explaining my teacher referred to as the "natural rate" theory.... with adaptive and rational expectations.. and I think he put it under the Keynesian model... just realized that. Thank you.
Balkance 1 year ago
Thanks a bunch....very helpful.. Please when you have time, make a video for the Laffer Curve.
Balkance 1 year ago
@Balkance never mind! thank you!
Balkance 1 year ago
[...] But if you go back to the original article by Phillips, he never demonstrates that such a thing exists in the real world. He manipulated and maneuvered the data around to make it look as if there was one. Once his errors are swept away, and the data broken down, the Phillips Curve vanishes as any kind of long-run pattern. It didn't take stagflation to teach us that. It was always untrue. by Jeffrey Herbener (from wikipedia)
kusubos 1 year ago
great explanation - i have found a new appreciation for economics. - great job keep the videos coming. thanks
11inspire 1 year ago
You are a savior...I have the worst ECON teacher ever and I've had to teach myself the whole semester...your videos help so much...just to get a jist of what we're being taught; on the homework last class i had to convince him that one of his questions was wrong, he claimed that "according to Keneysian models the AS curve is downward sloping"...
binnie333servant 1 year ago
Can someone explain the case when people suffer from money illsuion? why would we move back down the SRPC?
MickJaggerr1 1 year ago
Excellent! Well explained. Thanks a lot.
graw81 1 year ago
The Phillips Curve has been proven to be false due to the 1970s. In the 70s we had both high inflation and high unemployment.
residentzombie 1 year ago
Actually not.
See if you are at point 'B' in the video you are under the NAIRU..
While you are moving to point 'C' an EXOGENOUS supply shock (e.g. a rise in oil prices like in the 70s) causes the new SRPC to shift outwards further away point 'C' to say at point 'D' above 'C' in the LRPC.
Since you were below the NAIRU and are now moving towards it, you'll have increasing unemployment.
And since you are also moving to point 'D' in the LRPC you'll have higher inflation too.
hectorglz 1 year ago
You should read Milton Friedman's work about why the Phillips Curve is not accurate, he did when a Nobel because of it. The big difference is artifical growth (stimulous) vs natural growth (real growth in an economy). Bernanke doesn't understand the Phillips Curve is not accurate when the government is creating artifical 'growth' in the economy. It's not the same ball game even.
residentzombie 1 year ago
really helpful, easy to understand... all of your lessons is very useful... thanks
rosiecao 1 year ago
@rosiecao pajholden is correct in explaining the Phillips Curve, but it the Curve itself was disproven to be accurate in the 1970s. In the 70s we had both high unemployment and high inflation. Please discover Peter Schiff and the Austrian macro economic policies as taught by Ludwig Von Mises.
residentzombie 1 year ago
fantastic, didnt understand the concept in my macroeconomics A-level lesson, and i needed it for an essay, big help!
skwlisboring 1 year ago
what type of supply side policies would shift the lrpc to the left?
alz57 2 years ago
Comment removed
amare718 1 year ago
This has been flagged as spam show
If LRPC shifts to the left, we get a decrease in unemployment and an increase in price level. That means Aggregate Supply increases. A supply side policy to increase AS would be to subsidize businesses or deregulate
amare718 1 year ago
Keynes and Phillips will not teach you correct supply side macro economics. You need to study Ludwig Von Mises and Austrian economics if you want proper supply side macro.
residentzombie 1 year ago 2
@residentzombie you have to learn these concepts for an exam
he's not saying they are correct
georgejacksonio 1 year ago
i thought that when it moves to point c from b, that it was a result of money illusion in nominal terms rather than real??
alz57 2 years ago
Comment removed
zahoorf6 2 years ago
Why the nairu at X axis????
mapleleaf11 2 years ago
Unemployment is on the x-axis, and the NAIRU is the natural rate of unemployment.
captc502 2 years ago
It is non-accelerating inflation rate of unemployment which means inflation equals 0.
MrVietmath 2 years ago
Actually, NAIRU doesn't have to be zero, just constant and unchanging at this level of unemployment. On higher short run Phillips Curves inflation is constant at this rate of unemployment, but not zero. In other words prices are rising, but at a steady rate.
pajholden 2 years ago 2
@pajholden also isnt inflation really just the increase of the money supply and high prices is just a symptom of inflation?
bonfirejovi 1 year ago
Would the point NAIRU also be at pareto optimality? I picked up that it was equilibrium as soon as I thought about it, and obviously if unemployment falls (good), inflation rises (bad)
As you said, mutually exclusive. Can't get everything we want.
benjiimaster 2 years ago
Tmr is my exams on Macroeconomics. Thanks.
keitaru 2 years ago
how does change in inflation affects philip's curve in a short run?
khanpreston1 2 years ago
@khanpreston1 in the short run, as inflation increases, unemployment decreases.
captc502 2 years ago
The relation between unemployment and inflation is simply observable in normal phase of growth economy...simply statistic. When the economy decrease probably the bargaining of the union create a strong resistence to the down.
LUPIDI 2 years ago
great teacher , really helpful for revision Thank you so much
wefh2 2 years ago
This comment has received too many negative votes show
All lies. Inflation is because of the greedy and high debts. So are taxes when taxes fall on the poverished. Especially when only the rich can afford to find the loop holes. So feed someone else these lies.
UnderstandingCuresMe 2 years ago
I think you missed the point :/
kypswei 2 years ago
You are right at the point of inflation and relation to debts. I do not thing that the Philips curve is used in that way. A increase in consumer debts = lower cost of borrowing. This stimulates autonomous consumption thus GDP and shifting AD to the right. Taxes are required as ppl become effluent, they would spend on imports more than local goods. If Import increase more than your C+G+I+X, you will face AD shift to the left resulting in recession. Btw, are you a econs major?
keitaru 2 years ago
Comment removed
SoftOwl8 2 years ago
Well done!! The only thing i would have added is sticky wages when it comes to wage cuts.
sparc5 2 years ago
awesome... its helping so much for my macro exam
ElNiNoRules 2 years ago
What affect does the minimum wage have on this? Does it work without a minimum wage? Does the minimum wage screw it up? In the US, since the 70s, prices have been skyrocketing for everything except labor. Wages have not gone up at all, and have even been depressed in recent years. The real unemployment numbers have been hidden for decades, and the jobs that are left are of very poor quality.
UniversalAgent 2 years ago
Reemeber that there can be a wide gulf between A-Level economics and real-world economics. That's not to do A-Level economcis down but it just means that you should remember that the real world is more nuanced. Minimum wages are a perfect example. In A-level theory, tehy increase unemployment. In the real world the opposite can often occur.
slimes23 2 years ago
depends how socialistic is economy, I am living in Denmark where unions have very strong bargaining power (minimal wage per hour is around $20) Economy is working just like in the model ceretis paribus
charliethepunk 2 years ago
minimum wages can have three effects. It can Increase in the price of the products or services offered by a company (this is to offset the extra cost). It can decrease the amount of hours for every worker, or cut workers in general increasing the unemployment rate
tennisIS4pussys 2 years ago
thank you so much from the United Nations International High School in NYC!! Helps to study for finals withou8t pouring over books
TheGreatGoolash 2 years ago
cud u plz add more video on labour market and cost benefit analysis
boscokimani 2 years ago
can i just say you are amazing!!!
u shud work at eton cos the teachers there are wack there
uve inflated my happiness and unemployed my melancholy
reeeesssssssppppppeeeeeecccttt
arctictoondude252 2 years ago
Thank you!
This is great help!
ak8x 2 years ago
Awesome video! Thanks!
2226416 2 years ago
Thank you!!! your vids rock!
Rotaract7070 2 years ago
Thanks very much for the video. I'm current trying to revise for a Macro exam, this had me utterly confused whenever i'd tried to understand it via text or others explaining it, but now I understand perfectly!
chrisvcb 2 years ago 16
i love your video! thank you very much!
CherieNO5 2 years ago 2
bellissimo
DrRiq 2 years ago
What about glottalization introduce cheaper basic supplies suppress core inflation? Will this affect the curve?
utubmania2009 2 years ago
You bet it does! Why do you thing the American real income has gone nowhere for 20 years.
investortownhall 2 years ago
Think not thing.
investortownhall 2 years ago
thanx boys and girls!
sareensonic 2 years ago
this video really cleared a lot of things up for me,
keep it up! thank you.
real vs nomial:
real wages take into effect inflation, so workers will take the current inflation/prices in the economy as the new base and demand accordingly.
nominal wages would be that workers are not adaptive and rather than demanding a raise according to the new prices throughout the economy (like the real wage) they rather insist on only an increase based on their previous wage, regardless of what the inflation is
nadnerb09 2 years ago 8
@nadnerb09 Real wages do NOT keep up with real inflation levels. This is why the middle class and the poor are going backwards. The wealth not so much since they know how to invest properly to fight inflation better than the middle class and poor. The Phillips Curve is more about that either you can have high inflation and low unemployment or low inflation and high unemployment, but that you can never have low inflation and low unemployment or high inflation and low unemployment.
residentzombie 1 year ago
@nadnerb09 The stagflation of the late 1970's early 1980 disproved this stupid Keynesian/statist model.
residentzombie 1 year ago
what is the actual definition/contrast for/between "in real terms" and "in nominal terms"?
sareensonic 2 years ago
my understanding of it is, nominal means the current year(not looking at previous years for things such as PI(price index) or inflation
real is based off previous years so you would have to incorporate those aspects. like in the video at around, 6:00 , he says that if the workers want a real wage increase they would have to ask for a % increase of higher than the projected inflation
himynameisandrews 2 years ago
Thanks very helpful.
Xercaas 2 years ago
You are really amazing, thank's a million!
DjMalfofe 2 years ago
Nice elucidation except that u envoked the rejected money illusion concept to ramp uo ur analysis.Thanks.
obamaone1 2 years ago
i love you
spikethebeast 2 years ago
Thanks a lot!
I have one question though: this model only takes unemployment up to its natural rate into account. What's the relation between unemployment and inflation when the unemployment rate is actually higher than it would naturally be (because of, for example, a severe economic depression)?
pjvliegen 2 years ago
You should understand that economic depression or whatever fenomena it is - has impact on aggregate supply and demand. Use AD/AS model to understand the movement in market. Movement of demand (wether it's just small, temporary or huge depression) changes the situation along Phillips curve, however changes of supply shifts the curve up and down. Consider X-axis of AD/AS as employment and Y-axis as inflation.
AValujevs 2 years ago
Thanks!
K46620 2 years ago
well done
anmo0926 2 years ago
you're the most useful resource for a visual learner. Thanks!
411418 2 years ago 2
just a very quick question, you say that as there is a nominal increase in aggregate demand and "existing workers are made to work extra time" how would that decrease unemployment?
freakyman166 2 years ago
Comment removed
Questfortruth86 2 years ago
because firms may have to take on more workers as well as optional extra time in order to cope with increasing demand.
92bedfords 2 years ago
my question was whether he purposefully did not say "employing more labour"
freakyman166 2 years ago
not really what the question says though is it.
92bedfords 2 years ago
If p = a + b U + c p(e)
where p represents rate of inflation, p(e) represents expected rate of inflation and U represents unemployment. Why do many economists argue c = 1?
GiANtTWiNkY 2 years ago
This was still confusing :(
sonutulsiani 2 years ago
thanks man you helped me write my paper!!!
digitalbots 2 years ago
Your lectures proved very helpful to me in my studies. u r a nice teacher, ur knowledge of the subject and ur communication skills are perfect. Plz upload some more of ur lecture on micro and macroeconomics. THANK YOU!!
Ali, Karachi (Pakistan)
Alirazaarian 2 years ago
thanks for clarifying
DJFuserT 2 years ago
Thank you very much!
faresbank 2 years ago
cool!
kazakhtycoon 2 years ago
thanks a lot!
slavena10 3 years ago
Wow!!!!!!! I love you! Thank you soooooooo much!!!!!
thepungentpundit 3 years ago
3:17 is the best thing i have ever seen. the pure sadness at the inbevitiability of inflation!
thealee 3 years ago
Thank you very much!
MarkovicDeluxe 3 years ago
thank u so much i really understood
linkintekno 3 years ago
yo I hook that shit up carolinapanthers187.
I keep my man Paj up on that purple ya diiiiiiiiiiiiiiiiiig
senfan777 3 years ago
yeah sonnn. this guy's ill. he gets some good greek green. he did rail my wife though, so ima have to lace him
wallahe69 3 years ago
yo this vid is off the fucking chain dawg!!! phillips is my boy
paj is my nigguh!!!
senfan777 3 years ago
I know I smoke dubs with this guy all the time
carolinapanthers187 3 years ago
the original Philips curve got owned when "Stagflation" came along if i remember correctly.
good set of vids you make
thekylegarcia 3 years ago
yep
mikeyooh7 3 years ago
thank you! we need videos like this and not "paris hilton" ones..5 stars from me!
cheebalover 3 years ago 3
Thank you very much!
Googedo 3 years ago 2
pretty handy! Thanks
EivissaCaputMundi 3 years ago 2
unemployment
Mondro26 3 years ago
Can someone please tell me what the labels are on the vertical and horizontal axes of the final graph? I can't see them. Around the 8:45 minute mark, he says that classicists would recommend a cut in AD, I assume to reduce inflation, which would mean a higher unemployment rate, but I have no idea what the labels of either axis is, so I can't tell what what we would be reducing on the vertical axis in order to do this.
Chickey11 3 years ago
Hi. It says "inflation". My handwriting is challenging, I know. Opinion is divided on the matter: I consider it to be idiosyncratic and full of character. All my pupils think it is dreadful and bordering on illegible. Comments I write on their papers are most easily read by pinning the paper on a wall then reading it as you run past... hope it didn't spoil the video. Phil Holden
pajholden 3 years ago
and the horizontal is "u/t" or unemployment.
pajholden 3 years ago
@pajholden you haven't seen how my friend writes no one can read it even he has problems sometimes reading his answers to teachers when needed!
Dimapbs 1 year ago
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KnightOfElcar 3 years ago
because ur stupid, what does your boyfriend has to do with economics???
sulmanshaikh 3 years ago
The LRAS Cure, is Upward sloping, due to Innovation, Intelligence and Human Maturity.
Wages don't rise too much...The Moniterists are WRONG! =)...? What happend to Labor and Wages/I, during the late 70s?
and....What's "Data"? JK! Modeling is more important than 'fudgy' numbers. Uve done a smashing job. Thanks Dude!
shygui 3 years ago 2
omg thank you so much
dahack31 3 years ago 2
dear sir thank you for posting this. =D
semiramisme 3 years ago 2
Good videos. Thanks for posting.
Minnesnowtakid 3 years ago 2
Great service to Youtube. It's like having a professor available at all times.
Cheers mate!
thesiver 3 years ago 2
very gd econs explanations
alack90 3 years ago
THANK YOU for posting these!!!
yannis5 3 years ago
good stuff keep it up
Airstriker 3 years ago
What a pity! I realize that I cannot understand it. But I am learning since 2000.
I have to learn to understand this because I am really interessed for/in economics.
NetzKaiser 3 years ago
PS:
I just want to underline that I want to say that I am bad in languages not in economics.
I am still learning Englisch... (since 2000) ;-)
NetzKaiser 3 years ago
Thanks for this! QUESTION:
in your last point, would classicists really advocate for cuts in AD that would move us downwards in that stair-way-fashion you drew?
I thought Classicists believed in painless disinfl