Answer to Question #331243 in Macroeconomics for Nalyn

Question

Explain the relationship between inflation and unemployment through the Phillips Curve.

Answer 1

The Phillips curve shows the relationship between inflation and unemployment. In the short-run, inflation and unemployment are inversely related; as one quantity increases, the other decreases. In the long-run, there is no trade-off. In the 1960's, economists believed that the short-run Phillips curve was stable.