Problem 21

Introduction

The Phillips curve is an economic concept developed by A. W. Phillips which states  that inflation and unemployment have a stable relationship and inverse relationship.

The theory asserts 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.