J. Bradford DeLong
Since 1960 unemployment in the U.S. has fluctuated between a low of 4 percent and a high of nearly 10 percent. When unemployment has been high--above the natural rate-- inflation has been falling. When unemployment has been low-- below the natural rate--inflation has typically been rising.
However, the past forty years have also seen considerable fluctuations in the natural rate. In the mid-1960s, it seemed that unemployment rates as low as 5 percent were consistent with stable unemployment. By the early 1980s, it seemed that the government was risking accelerating inflation if it let the unemployment rate drop below 7 percent. By the late 1990s, it seemed as though the natural rate of unemployment had fallen back to 5 percent or so again.
|Inflation 1960-Present Unemployment 1960-Present Phillips Curve Growth and Fluctuations, 1980-1998 Long-Run Growth|
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