The Short Run Philips Curve

The analysis of Friedman and Phelps can be summarized in the following

equation:
Unemployment Rate = Natural Rate of Unemployment – a (Actual inflation –
Expected inflation)
How expected inflation
shifts the Short-Run
Philips Curve
 The Natural Experiment for the Natural-Rate
Hypothesis
Natural rate hypothesis is the claim that unemployment eventually returns to its
normal, or natural, rate, regardless of the rate of inflation