Web Links

Marginal URLs:

• p. 456: To try out the "biz/ed" Web site's virtual economy and use the Phillips curve as a guide for policymaking in the United Kingdom, go to http://www.bized.co.uk/virtual/economy/policy/outcomes/. Click on "Unemployment."

• Read a speech by former Fed Board Governor Frederic Mishkin outlining his view on the role of inflation expectations in influencing the dynamics of inflation at http://www.federalreserve.gov/newsevents/speech/Mishkin20070323a.htm.
• For an evaluation of the evidence on whether inflation expectations precede or lag behind actual inflation, go to http://www.brandeis.edu/global/rosenberg_institute/usmpf_2007.pdf.

• Read a discussion of why the U.S. NAIRU trended downward until the mid-2000s at http://www.dallasfed.org/research/er/1998/er9804a.pdf and http://www.federalreserve.gov/newsevents/speech/Mishkin20070323a.htm.
• For a critical evaluation of the concept of the NAIRU, go to http://www.frbatlanta.org/filelegacydocs/ACFC1.pdf.

The Inflation-Unemployment Relationship

According to the basic aggregate demand and aggregate supply model, the unemployment rate should be inversely related to changes in the inflation rate, other things being equal. This application allows you to take a direct look at unemployment and inflation data to judge for yourself whether the two variables appear to be related.

Title: Bureau of Labor Statistics: Economy at a Glance

Navigation: Go to http://www.bls.gov/eag/eag.us.htm to visit the Bureau of Labor Statistics Economy at a Glance home page.

Application: Perform the indicated operations, and then answer the following questions.

1. Click on the graph box next to Consumer Price Index. Take a look at the solid line showing inflation. How much has inflation varied in recent years? Compare this with previous years, especially the mid-1970s to mid-1980s.

2. Back up to Economy at a Glance, and now click on the graph box next to Unemployment Rate. During what recent years was the unemployment rate approaching and at its peak value? Do you note any appearance of an inverse relationship between the unemployment rate and the inflation rate?