Philips Curve

The Phillips Curve illustrates the observed trade-off between inflation (rising prices) and unemployment (people without jobs). Generally, when unemployment is low, wages and prices tend to increase, leading to higher inflation. Conversely, when unemployment is high, inflation tends to decrease. Think of it as a balancing act: reducing unemployment might boost inflation, while controlling inflation could lead to higher unemployment. Economists use this relationship to understand how efforts to improve employment might impact price levels, though in reality, the relationship can fluctuate over time due to various factors.