AP®︎ Macroeconomics: Topic 5.2 Flashcards

Master key terms and definitions for Topic 5.2 of AP Macroeconomics – The Phillips Curve to help you prep for quizzes and the AP exam.

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Term

Phillips Curve

Definition

A model showing the relationship between inflation and unemployment in the short run and long run.

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Phillips Curve
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A model showing the relationship between inflation and unemployment in the short run and long run.

MOD-3.A
Short-Run Phillips Curve (SRPC)
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A downward-sloping curve showing an inverse short-run relationship between inflation and unemployment.

MOD-3.AMOD-3.A.1
Long-Run Phillips Curve (LRPC)
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A vertical curve at the natural rate of unemployment showing no long-run inflation-unemployment trade-off.

MOD-3.AMOD-3.A.3
Natural Rate of Unemployment
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The unemployment rate that exists at full employment and where the long-run curve is located.

MOD-3.AMOD-3.A.3
Demand Shocks and Movement Along the SRPC
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Changes in aggregate demand move the economy along the SRPC, changing inflation and unemployment inversely.

MOD-3.BMOD-3.B.1
Supply Shocks and Shifts of the SRPC
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Changes in short-run aggregate supply shift the SRPC, changing inflation and unemployment together.

MOD-3.BMOD-3.B.2
Stagflation
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A situation with high inflation and high unemployment, usually caused by an adverse supply shock.

MOD-3.BMOD-3.B.2
Shifts of the LRPC
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The long-run curve shifts when the natural rate of unemployment changes.

MOD-3.BMOD-3.B.3
Phillips Curve Equilibrium and Gaps
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Long-run equilibrium is where SRPC meets LRPC; left is inflationary, right is recessionary.

MOD-3.AMOD-3.A.4