Phillips Curve
📈 Investing
Quick Definition
The Phillips Curve is an economic concept that illustrates an inverse relationship between the rate of unemployment and the rate of inflation within an economy.
Formula
π = πe - β(u - u*)Examples
- 1During economic expansion, as unemployment decreases, inflation tends to increase due to higher demand for goods and services.
- 2In a recession, high unemployment often leads to lower inflation as consumer demand decreases.
- 3Policy makers use the Phillips Curve to decide whether to focus on reducing inflation or unemployment, depending on current economic conditions.
Tags
economicsinflationunemploymentmonetary-policymacroeconomics
Related Terms
Other terms you might find helpful
Fiscal Policy
Fiscal policy refers to the government's use of spending and taxation to influence the economy.
Inflation
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power.
Monetary Policy
Monetary policy refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit to help promote national economic goals.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/20/2025