Question

A.W. Phillips found a: a. positive relation between unemployment and inflation in the United Kingdom. b. positive relation between unemployment and inflation in the United States. c. negative relation between unemployment and inflation in the United States. d. negative relation between unemployment and inflation in the United Kingdom.

Answer 1

Answer:

A.W. Phillips found (D) negative relation between unemployment and inflation in the United Kingdom.

Explanation:

“A.W.Phillips” gave the idea of correlation between unemployment and inflation in 1958. He researched on the data which showed relation between unemployment and minimal wage growth.  

He also found ‘’Phillips Curve’’ which represents relation between inflation and unemployment rate. According to this curve, when unemployment is high, wages increases slowly and unemployment is low, wages increase at a faster rate. This means that when unemployment is low, firms raise wages/salaries to attract whatever scarce labour in available in the market.