Phillips curve

economic model illustrating an inverse relationship between inflation and unemployment

The Phillips Curve shows the relationship between unemployment and wage inflation in an economy. It shows that as unemployment goes down, wages go up. It was discovered by British economist William Phillips.[1] He studied wage inflation and unemployment in the United Kingdom from 1861 to 1957.[2] The theory states that economic growth causes inflation. This causes more jobs to become available which lowers unemployment.[3] In the 1970s high levels of inflation and unemployment were occurring at the same time. This disproved the theory, at least in the long run.[3] Many economists feel that the Phillips curve still has value in the short run where there is still a tradeoff between inflation and unemployment.[4]

A Phillips curve
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References

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  1. "The Phillips curve". Economics Online Ltd. Retrieved 12 December 2015.
  2. Kevin D. Hoover. "Phillips Curve". Library of Economics and Liberty. Retrieved 12 December 2015.
  3. 3.0 3.1 "Phillips Curve". Investopedia. Retrieved 12 December 2015.
  4. "Phillips Curve". EconomicsHelp.org. Retrieved 12 December 2015.