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Chapter 25: Q. 13 (page 623)

What tradeoff does a Phillips curve show?

Short Answer

Expert verified

A Phillips curve shows the tradeoff among joblessness and expansion in an economy.

Step by step solution

01

Definition of Philip curve

The Phillips curve was created by A .W. Phillips, and is a concept in economics which states that unemployment and inflation have a correlation, which is in nature -- an inverse relationship.

02

Explanation

This means inflation occurs when economic growth occurs-which leads to more jobs - meaning lower unemployment. The Phillips bend shows a compromise among expansion and joblessness. Rising of inflation leads to a decrease in unemployment, and vice-versa.

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