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Question 1
Unemployment rates
Month 2012 2013 2014
January 8.3 6.6 6.6
Feb 8.3 6.7 6.7
March 8.2 6.6 6.6
April 8.3 6.2 6.2
May 8.2 6.3 6.3
June 8.2 6.1 6.1
July 8.2 6.2 6.2
August 8.0 6.1 6.1
September 7.8 5.9 5.9
October 7.8 5.7 5.7
November 7.7 5.8 5.8
December 7.9 5.6 5.6

Figure 1: unemployment rates (BLS Ian Thomas Shirt , 2015)
Inflation rates
Month 2012 2013 2014
January 2.9 1.6 1.6
Feb 2.9 2.0 1.1
March 2.7 1.5 1.5
April 2.3 1.1 2.0
May 1.7 1.4 2.1
June 1.7 1.8 2.1
July 1.4 2.0 2.0
August 1.7 1.5 1.7
September 2.0 1.2 1.7
October 2.2 1.0 1.7
November 1.8 1.2 1.3
December 1.7 1.5 0.8


Figure 2: Inflation rates (BLS, 2015)


Question 2
Trends observed
Unemployment trends
The rates in unemployment show a decline from January 2012 to December 2014.
Trends in inflation
The inflation rates show a general decline from January 2012 to February 2014. However, the rates move upwards between the months of April 2014 to July 2014. A decline is then observed from August 2014 to December 2014.
Question 3
Logic aggregate supply and demand
The Phillips curve shows an inverse trade-off between inflation rates and unemployment rates. However, the case is different for the periods under consideration. When unemployment is high, inflation is high. Instead, inflation shows a strong positive correlation with unemployment. The aggregate demand curve and Phillips curve and share similar components. The aggregate demand and Phillips curve share a similar relationship that affects unemployment and the price level aspect of aggregate demand. The relationship is dependent on the real output portion of aggregate demand.


There is a reason for the observed movement. Economists recognize three types of unemployment: structural unemployment Donte Jackson Shirt , frictional unemployment, and cyclical unemployment. Frictional unemployment and cyclical unemployment exist at all times, even when the economy is at its potential. They influence the natural rate of unemployment. In the long run, the economy operates at potential, and the unemployment rate gets to the natural rate of unemployment. Thus, the long run the Phillips curve is vertical at the natural rate of unemployment. Therefore DJ Moore Shirt , in the long-run, Phillips curve is a vertical line at the natural rate of unemployment. This means that in the long run, there is no trade-off between unemployment and inflation. (Karanassou, & Snower, 2008)
Question 4
Unemployment rates






Inflation rates



Question 5
There is a trade -off between inflation and unemployment. The inflation level falls, and unemployment falls as well. The Annual observations of unemployment and inflation in the United States from 2012 to 2014 do not seem consistent with a Phillips curve. However Greg Olsen Shirt , even though the inflation and unemployment rates are not consistent a negatively sloped, stable Phillips curve in the short run, connecting the unemployment and inflation points over time can allow more focus on different ways that these two variables may be related. (Fitzgerald & Nicolini, 2013)
Question 6
It is possible to apply the model of aggregate supply and aggregate demand together with the knowledge of fiscal and monetary policy to explain why the economy performed as it did. The relationship between unemployment and inflation depends significantly on events such as expectations and macroeconomic policy. It is imperative to think about the meaning of changes in inflation in examining the cycle of unemployment and inflation. (Schwarzer, 2012)
The decrease in inflation during a Phillips phase does not simply mean that the price level fall. It means that the price levels decrease by smaller and smaller percentages. Rising inflation means that the price level is increasing at an increasing rate. The US economy is in a recovery face after the great recession. In a recovery phase, the falling rate means the price level is rising Kawann Short Shirt , but by smaller and smaller rate. A recovery phase is characterized by the action of policy makers to boost aggregate demand. The price level rises, but at a slower rate, hence inflation falls. Unemployment falls as well (Bilman & Utkulu, 2010)

References
Bilman, A. S., & Utkulu Trai Turner Shirt , U. (2010). Inflation and output gaps reconsidered: nonlinear and assymetries phillips curve evidence. Journal Of Yasar University, 5(19), 3155-3170.
Bureau of labor and statistics (2015) unemployment: 1960-2015
Carlstrom, C. T., & Fuerst, T. S. (2008). Explaining Changes in the Phillips Curve: Trend In action Isn't Constant. Economic Commentary Ryan Kalil Shirt , 1-4.
Fitzgerald, T., Holtemeyer, B., & Nicolini, J. P. (2013). Is There a Stable Phillips Curve After All?. Region (10453369) Luke Kuechly Shirt , 27(4), 4-11.
Karanassou, M., Sala, H., & Snower Cam Newton Shirt , D. J. (2008). Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy. Journal Of Policy Modeling, 30(2), 279-300.
Schwarzer, J. A. (2012). A.W. Phillips and his curve: inflation expectations and Stabilisation policies. European Journal Of The History Of Economic Thought, 19(6), 976-1003.


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