Application and Implications of WS-PS and Phillips Curve Models for UK's 2022-2023 Inflation
The WS-PS and Phillips curve models offer a comprehensive framework for analyzing the high inflation in the UK during 2022-2023. According to this framework, a downward shift in the price-setting (PS) curve, caused by rising energy prices (a terms-of-trade loss) and increased taxes, created a bargaining gap. This gap led to an upward shift in the Phillips curve, as wage increases aimed at partially offsetting lost living standards were passed through to consumer prices. Beyond explaining past events, the model also highlights key issues that are critical for understanding the future evolution of inflation in this context.
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Ch.4 Inflation and unemployment - The Economy 2.0 Macroeconomics @ CORE Econ
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Introduction to Macroeconomics Course
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