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May 30, 2006
The Phillips Curve
Keynesians and classical economists differ sharply in their explanation for business cycles.
Keynesians attribute business cycles to shifts in aggregate demand. This would cause a positive relationship between income and prices. See the top diagram.
Classical economists attribute business cycles to shifts in aggregate supply. This would cause a negative relationship between income and prices. See the bottom diagram.
We discussed how these views are supported (or contradicted) by the Phillips curve data (handout).
Posted by bparke at May 30, 2006 09:44 PM