Response to Death of the philips curve

Despite the seeming failure of the Philips curve to provide an accurate relationship between inflation and unemployment in the long run, it still touches on the trade-off that govenments experience between output and price stability. In order to reduce unempoyment without experiencing accelerating rates of inflation it seems evident that the government must concentrate on supply side policies designed to increase the productive capacity of the economy. This can be done through improvements in efficiency or an actual increase in resources, both these solutions prove difficult to implement given the inherent immobilities of the labour market and the finite amount of natural resources available to any government.

[ Previous | Next ]