Macroeconomics 11th Edition by Michael Parkin

Exercise 27

Eurozone Unemployment Hits Record High As Inflation Rises Unexpectedly
Spain is suffering mass unemployment with a 25 percent unemployment rate and half of those out of work under 25. Eurozone unemployment as a whole rose to 10.7 percent. At the same time, eurozone inflation unexpectedly rose to 2.7 percent a year, up from the previous month's 2.6 percent a year.
a. How does the Phillips curve model account for a very high unemployment rate?
b. Explain the change in unemployment and inflation in the eurozone in terms of what is happening to the short-run and long-run Phillips curves.