The Phillips curve describes

the inverse relationship between inflation and unemployment in the economy

the relationship between unemployment and GDP

the relationship between the real interest rate and the money supply

the inverse relationship between the GDP and inflation

the inverse relationship between inflation and investment

The Phillips curve illustrates the relationship between the rate of inflation and the unemployment rate. When economic output falls, unemployment temporarily rises above the natural rate and the price level goes down. This is the inverse relationship between unemployment and prices that economists call the short-run Phillips curve.

Eventually, though, a surplus of workers develops, which leads to lower wages as workers start accepting lower pay. Businesses find they can lower prices to attract new sales and are able to increase hiring. This causes unemployment to move back to its natural rate in the long run. This process also works in reverse. When economic output rises, businesses expand to meet higher demand by hiring additional workers. Prices also go up because of this new demand, and the unemployment rate falls below the natural rate temporarily.

Eventually a shortage of workers develops, and workers begin to demand higher wages. When businesses are forced to pay higher wages, they instead lay off workers to protect their profit margins and the unemployment rate rises back to its natural rate. Although there is a tradeoff between unemployment and inflation in the short run, there isn't one in the long run. Workers will change their expectations when they encounter higher or lower inflation, and when they do, the unemployment rate will return to its natural rate. The short-run Phillips curve is therefore downward-sloping, while the long-run Phillips curve is vertical.

Дата добавления: 2015-10-29