1
Coursework Assessment
L1032 Macroeconomics 2 (2021-22)
Guidance on preparing a good essay.
I broke down the essay into 4 tasks, and each task into sub-tasks (in bold):
1. Theory: describe the concept of an accelerationist Phillips Curve and evaluate the
significance of inflation expectations;
2. Explain and discuss an alleged ‘death’ of the Phillips Curve;
3. Explain and illustrate short-run and medium-run dynamics in the IS-LM-PC model;
4. Ace my homework – Write my paper – Online assignment help tutors – Discuss in a comparative manner one counterargument to your answer for part (B).
Rationale for the task and how to think it through.
The four different tasks are broadly set up to assess your performance along the main assessment
criteria expected at Level 5. Specifically, part (A) is mainly geared towards ‘Knowledge and
Understanding’, part (C) towards ‘Application’, and parts (B) and (D) towards ‘Critical Thinking.’
Doing well in each of these three criteria is underpinned in a cross-cutting way by good performance in
‘Reading and Research’ and in ‘Presentation and Style’, respectively.
Structure.
In organizing your answers, when appropriate and possible use the DEEEDE scheme for each
argument or point you are making.
− D = definitions have to be rigorous;
− E = explanation and analysis clear – explain concepts, do not assume that I know;
− E = equation – use relevant equations to explain concepts, and explain equations;
− E = examples – bring some applications e.g. to support your arguments;
− D = diagrams, graphs – use and explain diagrams, make sure they are properly labelled;
− E = evaluation – sometimes the effects that you have discussed do not occur because other
conditions are in place –“on the one hand…on the other hand argument…”)
Given the essay’s maximum length of 1,500 word, you may not be able to implement this approach
one-for-one and that is okay, but at least use the DEEEDE approach as a guiding principle to render
your text as clear and as thoroughly reasoned as possible, within the tight constraints of the word
limit.
Overall, a good essay would typically consist of an introduction, followed by the main body of text
covering parts A-D, and a short conclusion.
2
Doing well on ‘critical thinking’ and ‘reading and research’, respectively, requires you to do a bit of a
literature research and find out what other researchers have contributed to this essay’s subject
matter.
Researchers need not necessarily be academics but could also be affiliated e.g. with think tanks,
central banks, government etc. but you should always make sure that your sources satisfy rigorous
academic standards. If you use some else’s thoughts or arguments, which is perfectly legitimate, you
need to reference it properly, even if you only paraphrase the argument. All the skills on ‘academic
writing’ apply and the Skills Hub provides ample resources.
Aim for a sensible number of entries in your bibliography – one is almost surely too little but more
than ten is also probably not compatible with the tight word limit.
The use of properly labelled diagrams, where appropriate, is essential and encouraged. Any way of
incorporating a graph into your submission document will be fine. For instance, a sharp picture of a
hand-written diagram pasted into a document is perfectly acceptable.
Before submitting your final version of the essay, go through the following list:
1) The list of the marking criteria (expectations) and check if you can tick all the items;
2) The list of the marking criteria (feedback versus expectations) and check what feedback you
would give yourself (is there anything you want to improve)?
3) Check the essay’s style and bibliography
4) Submit on time
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The Elusive Phillips Curve
Name
Course
Instructor
Institution
Date
The Elusive Phillips Curve
Introduction (A)
The Phillips curve illustrates the existence of an inverse correlation between the unemployment and inflation. Either, A.W Phillips was among the first economists who discreetly brought out the existence a negative relationship- between unemployment and wage inflation. In his study, Phillips integrate quite a significant number of factors in his interpretation of the relationship between unemployment and inflation. In his hypothesis, he determined that there exists a high demand of labour and there exists a few workers who are unemployed, then employers might have to raise their wages. On the contrary, when the demand for labour is low, and there exists a high unemployment level, the level of wages will fall. However, since salaries and wages are the primary input cost for companies, it means that when a company is forced to since its level of wages, then it will consequently be forced to raise the prices of products as well as the services being offered in the economy. The resultant effect of this is that the level of inflation will, have to be punished a bit higher. In a nutshell, the Phillips curve tends to illustrate the relationship existing between the general prices of products, inflation as well as unemployment.
Chen and Zha (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online) suggested that for any monetary policy exhibited by any country, low levels of inflation and full employment are its cornerstone. The People’s Bank of China monetary policy has been to ensure that there should exist a maximum employment, a maximum long term interest rates as well as stable prices for goods and services. The trade-off that has been in existence between the unemployment and inflation has played a crucial role which has led to several economists to embrace the Phillips curve in viewing the monetary and the fiscal policies from a different perspective. The Phillips curve discreetly shows the level of unemployment at a specified rate of inflation. Therefore, the curve has been broadly used to in aiming the existence balance between unemployment and inflation levels.
The Phillips curve represents an economic cycle present in any economy. The economic cycles also commonly known as the real business cycle exhibits characteristic of boom and recession (Zandwegher 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). In regard to the Phillips curve, which follows the various stages of the economic cycle, when the economy starts with a recession, there will exist a labour surplus which has been attributed by low economic activity meaning a significant number of workers will be forced to be laid off. However, as the economy starts to recover i.e. it enters the recovery phase, it means that there will be a significant increase in the aggregate demand. The resultant effect of this is that the employment rate will be improved. Sequentially, increment in the wages will inevitably follow. Either, the risen wages means that the production cost has increase. Firms will therefore have to pass the high production cost to the consumers. Prices of goods and services will increase. Inflation will creep. Firms will be forced to lay off workers. This explains how the Philips curve explained the inverse relationship between unemployment and inflation.
Faint Heartbeat? (B)
Phillips curve theory was holding true especially during the 1950s and the 1960s. However, the existence of stagflation between the period of 1967 and 1970 in France and U.K broke the inverse relationship as purported by Phillips curve. It has been estimated that there exists a relationship between the rate of inflation in China and the level of unemployment in China. The short term Philips curve discreetly illustrates the relationship between inflation rate and unemployment rates in China. Either, by estimating the quarterly data from 2009 to 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers of the China inflation rates and the level of unemployment, there also exists a vertical long term Phillips curve in China. The exchange rate policy, the output gap as well as the inflation expectation have played a crucial role in explaining the degree of inflation present in the China economy.
Phillips Curve Globalization and The Labor Market (C)
The article dubbed A Quick Refresher Course Macroeconomics by Gregory Mankiw investigates the changing perspectives of macroeconomics in the avenues of theory and practice. The author observes the initial macroeconomic model, that economists embraced before the second half of the 20th century, was the IS-LM model. The fact that the model focused on the impact of prices on output triggered macroeconomists to perceive the economy as self-correcting. In light of this, low prices triggered increased production due to high demand and vice versa. However, other extraneous factors, such as employment and natural calamities, also affect the economy. Resultantly, current scholars and experts in macroeconomics rare embark on the IS-LM model. It is for this reason that the author observes economists innovated and embarked on other macroeconomic models such as the MPS model. The model helps the research to examine economies based on not only price fluctuations but also the relevance of times and seasons. Mankiw (1990) examines that the history of macroeconomics models to decipher the trend of factors deemed significant in evaluating the economy.
Zandwegher (2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers) writes that the Phillips curve usually shows the tradeoff between existing between inflation and unemployment. It is evident that in regard to the Phillips curve, any attempt that is focused towards solving the inflation problem may lead to an increase in unemployment. For example, when the People’s Bank of China decides to increase money supply in their quest to curb inflation, investment activities will increase, aggregate demand will increase (Chen & Zha 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Through the trade unions, workers will demand more wages. In order to cut the cost of inputs, firm may be forced to lay off some workers thereby leading to lower levels of employment. The same applies when the government embraces a policy that will reduce the rate of unemployment. The action undertaken by the government will be to stimulate the economy.
Arguments and Counterarguments (D)
Argument- Monetarist and Neoclassicist Counter Argument on the Phillips Curve
In the 1960s, a compelling proof which validated the Phillips curve theory was presented. In the assertion, a lower rate of unemployment can be maintained indefinitely. The maintenance of the lower rate of unemployment largely depends on if a higher rate of inflation could be tolerated in the economy. Monetarists, the likes of Milton Friedman and Phelps pointed out upheld the concept of adaptive expectations whereby agents would adjust their expectations while taking into considerations the errors which were associated with previous periods. The argument of these monetarists was that Phillips curve was not adequate enough to be applied over a very long time (Zandwegher 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). The monetarist believed that in the long run, any economy will inevitably revert to its natural state with a natural rate of unemployment that is adjusting to the rate of inflation. In their definition of the natural rate, the monetarists pointed out that the natural rate is basically the long term unemployment rate which is usually observed once the short term effect of the economic cyclical factors have been dissipated. At this period, the wages have been adjusted and the level of the demand as well as the supply in the labour market has been fully balanced. In their assertion, if at all the workers will anticipate prices of products to rise as result of inflation, then it is evident that through their trade unions, these workers will advocate for an increase in wages and salaries so as to boost their real wages.
Neoclassicists led by Lucas have overly criticized the monetarist school of thought. The y neoclassicists pointed out that there exists incompatibility in regard to the hypothesis of adaptive expectation as pointed out by the monetarists. According to the Neoclassicists, a change in aggregate demand will significantly affect a change in aggregate supply making the level of employment as well the output not to change. The classical school of thought representatives also believed that consistent growth of prices as well as wages will eventually lead to situations whereby there is increase cost of production. In this case, a situation whereby there exists a growth of wages that is lagging behind productivity growth will be exhibited. The resultant effects of this is that there will be an economic slowdown, inflation rates will rise.
AS and AD in a classical Model
However, the vertical curve in the long run Philips curve have been distinctly explained by both the neoclassical as well as the monetarist school of thought. In their explanation, in the long run, tends to exist no trade-off between levels of inflation and unemployment. In the early 1980s, Keynesian school of thought has been on the forefront in questioning the viability of the interpretation of the Phillips curve by both the monetarist and the neoclassicists. The Keynesian school of thought questioned their hypothesis on the adaptive as well as the rational expectations. According to the Keynesian school of thought, they had believed that the expectation of any economic situations tends to be a complex process. In the same tandem, the Keynesians pointed out that the hypothesis associated with rational expectations and information asymmetry turns out to be controversial.
Counterargument: The Keynesian View on the Phillips Curve
Keynesian economist like Solow and Samuelson have worked on ways to give quite a theoretical illustration and justification of the Phillips curve. The belief of these Keynesian economists was built basing on the concept of static expectations. According to the Keynesian economists, there tend to exist an alternative perspective when it comes to inflation and unemployment. In their perception, the Phillips curve is interpreted as a certain dogma (Zandwegher 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). In their view, an increase in the aggregate demand will consequently lead to an increase in the demand of factors of production. In this case, the factor of production is labour. On their illustration of static expectation, they pointed out that static expectations tends to state that all the economic agents are static in their expectations, As a result of this, unemployment level will eventually reduce. Either, the unemployment level will decline significantly even way below the natural level of unemployment. As a result, the level of inflation will consequently increase.
[AS-AD Keynesian Model Retrieved from Khan Academy Org].
The Phillips curve has evidently played a crucial role in the evolution of the Keynesian theory. The role of the Philips curve centered in its contribution in filling some gaps left behind in the Keynesian school of thought. Among these gaps include the fact that the Keynesian theory had paid too little attention on the significance of the labour market as well as its relation to the market of goods and services. Keynesian theory had put its emphasis primarily on the interaction between the money and the goods market. Either, the Phillips curve has turned out to be an incredible tool for people who play a role in the formation of macroeconomic policies.
Conclusion
In the long run as explained in the Phillips curve, this will eventually lead to inflation. As a result, the negatively sloped Phillips curve that the policy makers in the Short Run will have discreetly chose the various combinations of inflation and unemployment rates. However, in the long run, inflation-unemployment trade-off will not be possible since the Phillips curve in the long run is entirely vertical. The unemployment inflation trade turns out to be only possible in the short run Philips curve. It is the primary reason why every country be it developed, developing or underdeveloped country are still being faced with the nightmare of unemployment-inflation trade off. Which calls for shifting monetary as well as fiscal policies in addressing this issue.
References
Chen, K., & Zha, T. (2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online). Macroeconomic Effects of China’s Financial Policies (No. w25222). National Bureau of Economic Research.
Mankiw, N. (1990). Recent Developments in Macroeconomics: A Very Quick Refresher Course. Journal Of Money, Credit And Banking, 20(3), 436. https://doi.org/10.2307/1992520
Van Zandweghe, W. (2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers). The Phillips curve and the missing disinflation from the Great Recession. Economic Review, 1612387, 5-31.
