Answer to Question #299119 in Macroeconomics for Jordan

Question

How does Phillips curve explain the relationship between inflation and unemployment along with it graph explanation

Answer 1

The Phillips curve shows the inverse trade-off between inflation and unemployment. As one increases, the other must decrease. In the above graph, an economy can either experience 3% unemployment at the cost of 6% of inflation, or increase unemployment to 5% to bring down the inflation levels to 2%.