00:01
So here we just have to define the phillips curve.
00:02
And instead of just jumping into a definition, let me try to give you a feel for what it really is.
00:07
The idea says that high unemployment should cool down pricing.
00:21
That's basically it.
00:23
That's not a complicated concept, right? think about the situation for firms when there's a lot of unemployment, right? firms pay wages.
00:31
And so when there's a lot of people unemployed, it gives the firms a lot of power in the labor.
00:35
Market.
00:36
I don't need to give you a big raise because i can go out and get someone else.
00:40
And that moderation of wage costs should also moderate firm pricing if you believe in any degree of competition, right? conversely, it says that low unemployment fuels pricing, when you've got a lot, a very tight labor market with very few people unemployed, that means that workers have a lot of power to negotiate for raises, to change jobs for better opportunities, to exert more compensation from firms.
01:15
And when workers are very good at exerting more compensation from firms, firms will inevitably pass some of that along in terms of higher prices...