The Phillips curve
Expert reviewed • 14 August 2024 • 2 minute read
What is the Purpose of the Phillips Curve?
The primary purpose of the Phillips Curve is to illustrate the trade-off between unemployment and inflation in an economy. It suggests that:
- When unemployment is low, inflation tends to be high.
- When unemployment is high, inflation tends to be low.
This relationship provides insights into the dynamics of the labour market and price stability, two key aspects of economic performance. A basic Phillips curve is displayed below:
The Phillips curve is significantly useful in supporting your arguments in essays about the NAIRU (Non-Accelerating Inflation Rate of Unemployment) and unemployment. To see how it is integrated into a band 6 economics essay, have a look at our premium drive.