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Explain what the short-run Phillips curve is trying to show. Why does the long-run Phillips curve...

Explain what the short-run Phillips curve is trying to show. Why does the long-run Phillips curve take a different shape?

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Answer #1

The shot run Philip curve represents the relationship between the inflation and unemployment in the market, it lays as the inflation in the economy increases the unemployment will fall. That is because the new wages takes some time to adjust to the new price and they are sticky. Allowing the firm in the market to hire more when the prices are higher. this make the curve negatively sloped.

But in the long run, the wages are not sticky and they adjust quickly to the change in the price level making the curve a straight line in the long run.

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