The Phillips Curve
By Cayli Cheeks
About
- Developed by New Zealand economist A.W. Phillips in 1958
- Demonstrates the stable and inverse relationship between the rate of inflation and the rate of unemployment
- States that economic growth causes inflation, which should lead to more jobs and less unemployment
- Has been somewhat disproven due to the phenomenon of stagflation that occurred in the 1970s
Short Run v. Long Run Phillips Curve
Short Run
- L- Shaped
- Demonstrates the inverse relationship between unemployment and inflation
Long Run
- Graph is vertical at the natural rate of employment
- No trade-off between inflation and unemployment in the long run, only in the short run
The Phillips Curve - 60 Second Adventures in Economics (3/6)