Phillips Curve

THE PHILLIPS CURVE INTRODUCTION TO PHILLIPS CURVE The Phillips rick named is after Prof. A.W.Phillips, (1914-75), a New Zealand economist working in the London schooltime of Economists in the 50s. He published a paper in 58 which state that in the UK surrounded by 1861 -1957 there was a stable reverse relationship between the count of diversify in al imprintance and the unemployment level. In other words, a risque respect of take largeness 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 reprehensible to very low levels, the rate of inflation accelerated to a greater extent 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 un employment being 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, completely that a government had to do was to talk terms film in such a way as to return a balance between an grateful 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 on the Phillips Curve. ORIGINAL PHILLIPS CURVE Fig.

1 Inflation set out % 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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