Federal Reserve Moves to Keep Stock Market Elevated During the last 20 years, Japan had low growth and low inflation. So did the European Union over the past decade. In the last expansion, the Fed was surprised to see falling unemployment with no increase in inflation.

a. What does the Phillips curve model say about the relationship between the unemployment rate and the inflation rate?

b. Given the information in the news clip, what is happening to the short-run and long-run Phillips curves?