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Long Run Phillips Curve definitions

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  • Long Run Phillips Curve
    A vertical line showing that unemployment remains constant at its natural rate regardless of inflation changes when the economy is at potential GDP.
  • Unemployment
    A condition where individuals able and willing to work are not employed, including those between jobs or seeking new positions.
  • Inflation
    A sustained increase in the general price level, which can fluctuate without affecting the natural rate of unemployment in the long run.
  • Potential GDP
    The output level where all resources are efficiently used, and the economy operates at its maximum sustainable capacity.
  • Natural Rate of Unemployment
    The unemployment rate present when the economy is at potential GDP, typically around 4%, reflecting frictional and structural factors.
  • Frictional Unemployment
    Unemployment caused by individuals transitioning between jobs or entering the workforce, even when the economy is healthy.
  • Structural Unemployment
    Unemployment resulting from mismatches between workers' skills and job requirements, often due to changes in technology or markets.
  • NAIRU
    The unemployment rate at which inflation remains stable, aligning closely with the natural rate of unemployment in the long run.
  • Aggregate Demand
    The total demand for goods and services in an economy, which can affect price levels but not the natural rate of unemployment in the long run.
  • Long Run Aggregate Supply
    A vertical supply curve in the ADAS model representing output at potential GDP, unaffected by price level changes.
  • Price Level
    A measure of the average prices of goods and services, which can vary in the long run without impacting unemployment.
  • Market Equilibrium
    A state where supply and demand balance, and in the long run, unemployment is fixed at its natural rate regardless of inflation.
  • Short Run Phillips Curve
    A curve showing a trade-off between inflation and unemployment, which differs from the vertical long run Phillips curve.
  • Long Run Equilibrium
    A condition where the economy operates at potential GDP, with unemployment at its natural rate and inflation not affecting it.