Phillips Curve

AAA

DEFINITION of 'Phillips Curve'

An economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship. According to the Phillips curve, the lower an economy's rate of unemployment, the more rapidly wages paid to labor increase in that economy.

INVESTOPEDIA EXPLAINS 'Phillips Curve'

The theory states that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. However, the original concept has been somewhat disproven empirically due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment.

RELATED TERMS
  1. Structural Unemployment

    A longer-lasting form of unemployment caused by fundamental shifts ...
  2. Non-Accelerating Inflation Rate ...

    The specific level of unemployment that exists in an economy ...
  3. Economics

    A social science that studies how individuals, governments, firms ...
  4. Frictional Unemployment

    Unemployment that is always present in the economy, resulting ...
  5. Inflation

    The rate at which the general level of prices for goods and services ...
  6. Okun's Law

    The relationship between an economy's unemployment rate and its ...
RELATED FAQS
  1. How can inflation be good for the economy?

    Find out why some economists and public policy makers believe that inflation is a good, or even necessary, phenomenon to ...
Related Articles
  1. Economics

    Examining The Phillips Curve

    This model depicts an inverse relationship between unemployment and wage inflation, but is it accurate?
  2. Economics

    What Is Fiscal Policy?

    Learn how governments adjust taxes and spending to moderate the economy.
  3. Economics

    What You Need To Know About The Employment Report

    This widely watched indicator of economic well-being directly influences the market.
  4. Economics

    What is Deflation?

    Deflation is an economic term used to describe a period of declining prices for goods and services. Decreases in the money supply, government spending, consumer demand and business investment ...
  5. Economics

    Does A Junk Rating Reflect Russia's Fundamentals?

    Moody’s, like other credit rating agencies, has downgraded Russia’s sovereign debt rating to non-investment grade, but does this reflect Russia's economy?
  6. Economics

    What Would Happen If Interest Rates Rise?

    This time around, while U.S. long-term yields have rebounded from their January lows, rates have generally been lower than where they ended 2014.
  7. Investing

    What Has Been Groupon’s Growth Strategy?

    Groupon established a strategy with efforts to become a broader force in the e-commerce world and to expand more strongly into international markets.
  8. Economics

    The Impact Of Ending The US Embargo On Cuba

    Many argue that ending the US embargo on Cuba will not only make US consumers happy, but also help the US economy and bring more freedoms to Cuba.
  9. Economics

    Is The US Dependence On Foreign Oil Necessarily A Bad Thing?

    We examine the myths and facts about US dependence upon foreign oil.
  10. Budgeting

    How Your Government's Budgetary Decisions Impact the Public Sector

    Issues facing the public sector are not unlike some issues facing America’s oldest and largest companies, but with larger and broader impacts.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center