Sunday, February 27, 2011

Warning: Economics Humor involving the Phillips Curve is enclosed---It is REALLY is!!

The Phillips Curve is a Macroeconomic model that illustrates the trade-off between Inflation and Unemployment that occurs as Aggregate Demand increases or decreases along the Short-Run Aggregate Supply Curve.  In AP Macro, we show the trade-off results in an inverse relationship between the two varibles.  Japan, with its never-ending  bout with deflation, appears to be an exception to the rule.  It is just a coincidence, but the graph matches the shape of the country.  This is funny to economists---it really is!  :)

Japan's Phillips Curve Looks Like Japan

This is what a traditional Phillips Curve looks like...NOW do you get the joke??? :)

Source HERE

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