The Phillips curve shows a tradeoff between inflation and unemployment from "summary" of Principles of Macroeconomics by N. Gregory Mankiw
The Phillips curve illustrates the relationship between inflation and unemployment in an economy. It suggests that there is a tradeoff between these two variables - as one goes up, the other tends to go down. The curve is based on the observation that when unemployment is low, inflation tends to be high, and vice versa. This relationship was first identified by economist A. W. Phillips in the 1950s. According to the Phillips curve, when unemployment is high, workers have less bargaining power, leading to downward pressure on wages and prices. This results in low inflation. Conversely, when unemployment is low, workers have more bargaining power, leading ...Similar Posts
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