Short-Run Phillips Curve & Stagflation

If inflation persists, and the expected rate of inflation rises, then the entire SRPC moves upwards

Stagflation: Simultaneous rise in inflation and unemployment

Supply Shocks (Adverse Supply Shocks): Rapid and significant increase in resource cost, which causes the SRAS to shift

• Depreciation of a Dollar
• Oil Embargo
• Rapid increase in price of gas

• If inflation expectations drop due to new technology, then SRPC will move downward

LRPC: Natural Rate of Unemployment= Frictional, Seasonal, and Structural Unemployment

Missing Index

• A combination of inflation and unemployment in any given year. 
• Single digit misery is good