Phillips Curve

Phillips Curve

An economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship.

Notes:

The theory states that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. The concept has been proven empirically and some government policies are directly influenced by it.

See also: Economics, Frictional Unemployment, Inflation, Natural Unemployment, Okun's Law, Structural Unemployment

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Phillips Curve

A graph that supposedly shows the relationship between inflation and unemployment. It is conjectured that there is a simple trade-off between inflation and unemployment (high inflation and low unemployment, and low inflation and high unemployment). Named after A.W. Phillips. Obviously, the relation between these important macroeconomic variables is more complicated than this simple graph would suggest. For a modern treatment, see work of Robert Lucas.