Q1. Briefly describe the theory of the Phillips curve and its origin of development as a theory of inflation-unemployment trade-off.
Q2. In terms of the effectiveness of expansionary or contractionary fiscal or monetary policy actions, how serious is the Phillips curve when the SRAS curve is relatively flat? Draw a hypothetical figure to illustrate your explanation.
Q3. When the SRAS curve is relatively steep, how is the Phillips curve different from what you described in your answer to Q2? Draw a hypothetical figure to illustrate your explanation and to compare with the figure in Q2.
Q4. Draw a hypothetical diagram of the AD-AS model of Macroeconomics and explain in your own words the sources of accelerating inflation. Provide historical evidence as an example.
Q5. Critically, but briefly, explain why the Phillips curve failed to explain the inflation and unemployment data for the US economy in the 1970s, late 1990s, and late 2010s. Were these situations identical or different? Give examples.
