The Phillips curve relates the rate of inflation with the rate of unemployment. The Phillips curve argues that unemployment and inflation are inversely related: as levels of unemployment decrease, inflation increases. The relationship, however, is not linear.
What is the relationship between inflation and unemployment shown by the Phillips curve?
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.
Phillips curve :
graphic representation of the economic relationship between the rate of unemployment (or the rate of change of unemployment) and the rate of change of money wages. Named for economist A. William Phillips, it indicates that wages tend to rise faster when unemployment is low.
Inflation rates :
inflation, in economics, collective increases in the supply of money, in money incomes, or in prices. Inflation is generally thought of as an inordinate rise in the general level of prices.
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