Monetary Policy involves the country’s central bank controlling the interest rate and money supply. Monetary policy affects Aggregate Demand (AD), and an expansionary monetary policy increases AD, while a contractionary monetary policy decreases AD.
The Natural Rate of Unemployment (NRU) is the rate of unemployment after the labor market is in equilibrium, when real wages have found their free-market level and when the aggregate supply of labor balanced with the aggregate demand for labor.
The Pigou effect is an economics term that refers to the stimulation of output and employment. Increasing consumption causes this because of a rise in real balances of wealth, particularly during deflation.
The Aggregate Demand and Aggregate Supply Equilibrium provides information on price levels, real GDP, and changes to unemployment, inflation, and growth as a result of new economic policy.
The Phillips Curve showed that there was a trade-off between the inflation rate and the unemployment rate. Alban Phillips based the original work on data from the UK from 1861-1957.
A fall or left shift in Aggregate Supply is the cause of Cost-Push Inflation. This shift can occur from an increase in the cost of production or a decrease in the volume of production.