What is the Phillips Curve? What concept does it illustrate?
What will be an ideal response?
The Phillips Curve shows the relationship between the unemployment rate and the rate of inflation. The relationship is an inverse one, so there is a short-run trade off between the unemployment rate and the rate of inflation. For example, if the unemployment rate increases by 1% then the inflation rate might decline by .5%. The concept was developed by A.W. Phillips in Great Britain based on empirical observation of the relationship between unemployment and inflation in that nation. Modern economists reject the idea of a stable, predictable Phillips Curve, although many economists do agree that there is a short-run trade off between unemployment and inflation.
You might also like to view...
In the above figure, the monopolistically competitive firm makes an economic profit of
A) $0. B) between $0 and $50 per day. C) between $50.01 and $100 per day. D) greater than $100.01 per day.
The level of today's Social Security payroll tax is significantly larger than initially envisioned
a. True b. False