Inflation and unemployment can be very harmful to the economy, and so governments will always try to control them by implementing economic policies. However, knowing how a problem originates is always helpful when trying to fix it. This is the reason why economists have created an incredible amount of theories and economic models that try to explain how these inflation and unemployment behave.
In this Learning Path we’ll take a look at a few economic models that explain, at least to some extent or in some given context, inflation and unemployment.
NCM, an economic doctrine that appeared in the early 1970s;
NCM’s Phillips curve, which incorporates rational expectations;
Cahuc’s adjustment costs model, which analyses adjustments in employment levels.
NKE, which appeared in the late 1970s, and focused on the analysis of inflation;
NAIRU, the non-accelerating inflation rate of unemployment;
Layard-Nickell NAIRU model, based on wage determination.
Prices and growth:
Menu costs are costs that result from price changes;
Mankiw’s menu costs model, Gregory Mankiw’s view on the issue;
Business cycles, which also explain the level of unemployment.