From what you learned in class, what relationship between unemployment and inflation does the Phillips Curve usually describe?

1. Read the article “A flattened curve: Why does low unemployment no longer lift inflation?” (The Economist, Aug 22, 2020).

2. Answer the following questions in writing. a. From what you learned in class, what relationship between unemployment and inflation does the Phillips Curve usually describe? In that context, what does the author of the article mean when they claim that the Phillips Curve “has become strangely flat”? b. In the article, the author emphasizes the role that wages play in the Phillips Curve. Why are wages an important link connecting low unemployment to high prices? Explain. c. Expectations about monetary policy and inflation play a big role in our understanding of the Phillips Curve. The article describes Milton Friedman’s argument why inflation expectations matter. In class, we made a somewhat different argument why expectations about monetary policy are important. Describe and compare both arguments. Which one is better suited to explain “a flattened curve”? d. The article cites a number of different reasons why the Phillips Curve might seem (or be) flat. Pick one and explain it in your own words.