Definition of Phillips curve:
The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. However, the original concept has been somewhat disproven empirically due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment.
Graphic description of the inverse relationship between wages and unemployment levels (higher the rate of change of wages lower the unemployment, and vice versa). Although its main implication is that a government has to strike a balance between the two levels, the relationship between the levels (in general) is not stable enough to reach an exact judgment. Also called tradeoff curve, it was invented in 1958 by the UK engineer and economist Albert William Housego Phillips (1914-75).
A supposed inverse relationship between the level of unemployment and the rate of inflation.
The concept behind the Phillips curve states the change in unemployment within an economy has a predictable effect on price inflation. The inverse relationship between unemployment and inflation is depicted as a downward sloping, concave curve, with inflation on the Y-axis and unemployment on the X-axis. Increasing inflation decreases unemployment, and vice versa. Alternatively, a focus on decreasing unemployment also increases inflation, and vice versa.
How to use Phillips curve in a sentence?
- The Phillips curve was displayed during 2015 because despite the global prosperity being at an all time high there are only so many resources to analyze.
- I checked out the Phillips Curve to see what was happening with it and was really glad to see that the two variables were doing great.
- Clearly, the linear relationship between unemployment and inflation posited by the Phillips curve does not hold.
- When trying to figure out how much to offer to prospective employees the phillips curve can be a good resource.
- The Phillips curve states that inflation and unemployment have an inverse relationship. Higher inflation is associated with lower unemployment and vice versa.
- The Phillips curve was a concept used to guide macroeconomic policy in the 20th century, but was called into question by the stagflation of the 1970's.
- Understanding the Phillips curve in light of consumer and worker expectations, shows that the relationship between inflation and unemployment may not hold in the long run, or even potentially in the short run.
Meaning of Phillips curve & Phillips curve Definition