Phillips Curve


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.

BREAKING DOWN '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.

  1. Stagflation

    A condition of slow economic growth and relatively high unemployment ...
  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Structural Unemployment

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

    The specific level of unemployment that exists in an economy ...
  5. Frictional Unemployment

    Unemployment that is always present in the economy, resulting ...
  6. Economics

    A social science that studies how individuals, governments, firms ...
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