The Phillips Curve

Originally this showed the relationship between Money Wages and Unemployment,
More commonly it is used for the relationship between Inflation and Unemployment.

Diagram of Phillips Curve

phillips curve

· Keynesians argue that as Output rises Unemployment falls, but there is a trade off of higher inflation.

· As AD falls unemployment will rise but inflation will fall

· As Output increases there is an increase in demand for labour, therefore unemployment falls. However the increase in the price level indicates there has been a rise in inflation

· Keynesians argue that the evidence of the 1950s and 1960s suggest that there was a trade off between unemployment and inflation.

Related

 

Revision Notes on Unemployment

Revision Notes - Unemployment

Costs of Unemployment

Measuring Unemployment

Causes of Unemployment

Phillips Curve

Monetarist View

Which is Correct? - Monetarist or Keynesian View

Natural Rate of Unemployment

Unemployment Essays