Phillips Curve

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.

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Phillips Curve

A curve postulating an inverse relationship between inflation and unemployment. That is, the Phillips curve theorizes that when inflation is low, unemployment is high and vice versa. This was a predominant theory for much of the mid-20th century until stagflation (high unemployment and high inflation) began to occur in the 1970s. Few economists use the Phillips curve today though it is a component in Gordon's triangle model.