The inflation rate is greater than the expected inflation rate.
What is the Phillips Curve?
- A. W. Phillips invented the Phillips curve, which states that inflation and unemployment have a stable and inverse relationship.
- However, the original premise has been somewhat empirically disproven due to the development of stagflation in the 1970s, when both inflation and unemployment were high.
- The Phillips curve notion asserts that changes in unemployment within an economy have a predictable influence on price inflation.
- Inflationary pressures reduce unemployment, and vice versa.
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