Summary of Changes in the AD-AS Model and the Phillips curve | APⓇ Macroeconomics | Khan Academy

00:00:00 - 00:05:00

Khan Academy discusses the changes in the AD-AS model and the Phillips curve. The Phillips curve is a typical curve illustrating how inflation and unemployment are related. The long run Phillips curve shows that in the long run, regardless of the inflation rate, the natural rate of unemployment will be six percent. However, the AD-AS model suggests that the curve might shift to the left or right over time depending on structural changes in the economy.

• 00:00:00 In this video, Khan Academy discusses the changes in the AD-AS model and the Phillips curve. The Phillips curve is a typical curve illustrating how inflation and unemployment are related. The long run Phillips curve shows that in the long run, regardless of the inflation rate, the natural rate of unemployment will be six percent. When the economy is operating at full employment, unemployment is lower than that and corresponds to a negative output gap. If we experience a negative demand shock, such as a rise in prices, the short run aggregate supply curve shifts to the left, resulting in higher unemployment and a negative output gap.
• 00:05:00 The AD-AS model describes the short- and long-term shifts in the Phillips curve. The model suggests that, over time, the curve might shift to the left or right depending on structural changes in the economy.