Assignment Task: Phillips Curve
We saw that the relationship between inflation and unemployment in England has weakened over time. Two explanations brought forward by the Bank of England are that: (i) the Phillips Curve have shifted down. (ii) the Phillips Curve has become flatter. First, illustrate and explain these changes using figures. Second, discuss what could have caused these changes. Third, explain which of the two scenarios - (i) or (ii) - you would expect to constrain policy makers more in their ability to control inflation?