1. What is the Phillips curve and what inverse relationship does it describe?

2. What did A. W. Phillips observe about the relationship between unemployment and wages in the United Kingdom?

3. How did economists extend Phillips's findings about wages to develop a theory about inflation and unemployment?

1. What did Milton Friedman argue about the relationship between monetary policy, inflation, and unemployment in the long run?

2. According to classical theory and monetarists, why does growth in the money supply not affect unemployment in the long run?

1. How did economists in the 1960s believe that increasing aggregate demand would affect unemployment, wages, and prices?

2. What are recessionary and inflationary gaps, and how did policy makers use the Phillips curve to address each?

1. What economic conditions in the late 1960s and early 1970s caused the Phillips curve relationship to break down?

2. What is stagflation and what policies did President Nixon implement that contributed to it?

3. How did the 1974 OPEC oil embargo affect the economy and the Phillips curve relationship?

1. Why did economists conclude that the Phillips curve relationship exists only in the short run and not the long run?

2. What is the natural rate of unemployment and how does it relate to the long-run Phillips curve?

3. How does the long-run Phillips curve differ in shape from the short-run Phillips curve and what does this difference mean?

4. What happens to the short-run Phillips curve when the government pursues expansionary policies and workers' inflation expectations change?

1. What are supply shocks and demand shocks, and how do they differ in their effects on the Phillips curve?

2. How does a negative supply shock affect the short-run Phillips curve and the trade-off between inflation and unemployment?

3. How does a positive demand shock move the economy along the short-run Phillips curve?