The Phillips Curve Flashcards
What relationship does the Phillips curve show?
The relationship between inflation and unemployment in both the short term and long term.
How was the Phillips curve constructed?
Through analysing historical data that looked at the correlation between unemployment and inflation.
What does the Phillips curve tell us?
Inflation and unemployment are negatively correlated.
Define: Phillips curve
The observed trade off between unemployment and inflation.
What conflict does the Phillips curve create for governments?
It means there is a trade off between controlling inflation rates and unemployment reduction.
Define: NAIRU
The non accelerating inflationary rate of unemployment. As long as unemployment remains constant than inflation will not change indefinitely.
