Question 1

What was the Phillips curve and what relationship did it describe?

Accepted Answer

The Phillips curve represented a stable trade-off between inflation and unemployment observed during the 1960s. According to this relationship, low unemployment was associated with high inflation, while high unemployment corresponded to low inflation. Economists believed this inverse relationship was predictable and stable, forming the basis for macroeconomic policy decisions during that era.

Question 2

Why did the Phillips curve break down during the 1970s?

Accepted Answer

The Phillips curve collapsed due to oil shocks in 1973 and 1979. Sharp increases in oil prices raised production costs across industries, causing firms to cut production and reduce workforces. This simultaneously increased both inflation and unemployment—a condition called stagflation—contradicting the inverse relationship the Phillips curve predicted.

Question 3

What is stagflation and how did it challenge economic theory?

Accepted Answer

Stagflation is the simultaneous rise in inflation and unemployment, which occurred during the 1970s oil crises. This phenomenon directly contradicted the Phillips curve's prediction of an inverse trade-off between these variables. The experience showed that external shocks could disrupt the stable relationship economists had relied upon for policy guidance.

Question 4

How did the 1973 oil price shock affect production and employment?

Accepted Answer

The 1973 oil price spike increased production costs across many industries. Facing higher expenses, firms reduced output and cut their workforces, pushing unemployment upward. Simultaneously, prices rose across goods and services, making everyday items more expensive for consumers and creating the stagflation condition.

Question 5

What economic mechanism caused inflation and unemployment to rise together?

Accepted Answer

Oil shocks acted as negative supply shocks, shifting the short-run aggregate supply curve leftward. This reduced output while raising prices simultaneously. Higher production costs forced firms to reduce employment, creating the unusual situation where inflation and unemployment both increased together, defying the Phillips curve model.

Question 6

How did the 1970s oil crises change macroeconomic thinking?

Accepted Answer

The breakdown of the Phillips curve during the 1970s marked a turning point in macroeconomic theory. Economists began questioning the stability of the inflation-unemployment trade-off and sought new explanations for how inflation and unemployment interact. These events demonstrated that external factors could simultaneously increase both variables, requiring revised theoretical frameworks.

Question 7

What role did oil price increases play in disrupting the Phillips curve relationship?

Accepted Answer

Oil price shocks in 1973 and 1979 demonstrated that external supply-side events could break the Phillips curve's predicted inverse relationship. By simultaneously raising production costs and reducing output, these shocks increased both inflation and unemployment together. This showed that the seemingly stable trade-off was vulnerable to external economic disruptions.

フィリップス曲線の崩壊（1970 年代）

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