Principle 10 Of Mankiw And Taylor's Ten Principles Of Economics
The relationship between the inflation rate and the unemployment rate looked to have broken down. It was therefore possible to have a number of inflation rates for any given unemployment rate. Mankiw and Taylor (2011) and Begg, Fischer and Dornbusch (2008) have both shown that the Breakdown of Phillips curve was caused by several reasons such as high boost in the price of oil on world markets because of the OPEC (Organization of the Petroleum Exporting Countries) supply cuts, another reason was the “Expansionary or accommodative monetary policy pursued by central banks.” During this period the United Kingdom and many other countries began to experience growing unemployment and higher inflation rates as well, this came to be known as ‘Stagflation”. (See diagram …show more content…
Economics. 9th ed. Berkshire: McGraw-Hill Education. p508-512.
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