AS.180.101 Lecture Notes - Lecture 17: Phillips Curve, Potential Output, Real Business-Cycle Theory
Document Summary
Spurred debate to economists: liberals vs conservatives: essence of the debate is about whether or not adam smith was right about having gov"t ignore economic fluctuations. Goals of the federal reserve: keep real gdp as rapidly as it can, keep unemployment as low as it can be, and keep inflation stable and low. New classical economists (adam smith)= markets get you exactly where you need to go and therefore you do not need government intervention: the world is the best it can be at any moment . Another argument= as bad as economic conditions may be, washington will make it worse. Unemployment and inflation: the 2 great macro problems the fed deals with (in the short run) are unemployment an inflation, phillips curve= a short-run relationship between inflation and unemployment; indirect relationship. We"ve grown faster than the economy can handle in the economy.
