00:01
From one year to the next, inflation falls from 5 to 4%.
00:11
Now, the unemployment on the other hand is rising from 6 to 7%.
00:20
Which of the following events could be responsible for this change? that the central bank increases the growth rate of the money supply or that the government cuts spending and raises taxes to reduce the budget deficit or that newly discovered oil reserves cost world oil prices to plummet or that the appointment of a new fed chairman increases expectation inflation.
00:49
So, if inflation is declining and unemployment is rising, this could mean that if the central bank of a country takes the decision to maintain the money growth at a higher rate, then they would increase the money supply in the economy.
01:07
So, the money supply would be increased and the increase in the money supply would expand the aggregate demand.
01:21
Expansion in the aggregate demand would cause a huge employment opportunities so unemployment would fall.
01:28
So, the money supply increasing would expand the aggregate demand and the expansion of aggregate demand would lower unemployment rates.
01:53
But now, with the lower unemployment rates, there will be higher inflation because the increase of the aggregate demand will lead to the increase in the price of good services.
02:02
So, basically, the short -run philip curve will shift downwards indicating that there will be a lower unemployment rate and higher inflation rate...