Phillips Curve

THE PHILLIPS CURVE INTRODUCTION TO PHILLIPS CURVE The Phillips shorten named is after Prof. A.W.Phillips, (1914-75), a New Zealand economist working in the London teach of Economists in the 50s. He published a paper in 58 which state that in the UK betwixt 1861 -1957 there was a stable reverse relationship amid the count of convince in al imprintance and the unemployment level. In other words, a high straddle of take pretentiousness was associated with a low rate of unemployment and vice versa. consequently the Phillips curve depicts this inverse relationship between the rate of unemployment and the net inflation. Phillips suggested that historical data showed dapple unemployment go away to very low levels, the rate of inflation accelerated more(prenominal) rapidly while at very high levels of unemployment inflation levelled off or became negative. FEATURES OF PHILLIPS CURVE 1. The curve was non-linear, successive reductions in unemployment bei ng associated with an ever-higher rate of enlist inflation. 2. The curve could pass on a lower floor the horizontal axis and dumbfound much flatter. Significance of the Phillips Curve The significance of Phillips findings were that since an inverse relationship seemed to exist between unemployment and inflation, any that a government had to do was to talk terms contend in such a way as to feign a balance between an acceptable unemployment rate and an acceptable inflation rate - there was a tradeoff between the two. However the authorities were restricted to those combinations of inflation and unemployment that mystify along the Phillips Curve. ORIGINAL PHILLIPS CURVE Fig.

1 Inflation cast % 4% B ( A 0 2 % ( 6% Unemployment Rate % In...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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