Tilted Forum Project Discussion Community - View Single Post - Any Economists willing to explain the Phillips curve??? Please! :-)

onetime2 · 10-27-2003, 05:07 AM

The Phillips curve captures the inverse relationship between inflation and unemployment (inflation on the y-axis and unemployment on the x-axis). Whenever unemployment is low, inflation is high. When unemployment is high, inflation is low.

Unemployment is considered low or high relative to the so-called natural rate of unemployment (there are differing opinions on what this rate is. Traditionally, the natural rate is thought to be around the 5% mark). Inflation is considered low or high relative to the expected rate of inflation.

When the phillips curve is steep, small movements in unemployment will have a large impact on inflation.

A shallow phillips curve means that even large changes in unemployment will have only a small effect on inflation.

Hope this helps.

--Paul

10-27-2003, 05:07 AM	#2 (permalink)
onetime2 Junkie Location: NJ	The Phillips curve captures the inverse relationship between inflation and unemployment (inflation on the y-axis and unemployment on the x-axis). Whenever unemployment is low, inflation is high. When unemployment is high, inflation is low. Unemployment is considered low or high relative to the so-called natural rate of unemployment (there are differing opinions on what this rate is. Traditionally, the natural rate is thought to be around the 5% mark). Inflation is considered low or high relative to the expected rate of inflation. When the phillips curve is steep, small movements in unemployment will have a large impact on inflation. A shallow phillips curve means that even large changes in unemployment will have only a small effect on inflation. Hope this helps. --Paul __________________ Strive to be more curious than ignorant. Last edited by onetime2; 10-27-2003 at 05:10 AM..