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Phillips curve |
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The relationship between the percentage change in money wages and the level of unemployment. Phillips (1958) showed that the lower the unemployment, the higher the rate of change of wages. As the rate of increase in wages influences the rate of inflation, the Phillips curve suggests that the lower the level of unemployment the higher the rate of inflation. This implies that the aims of low unemployment and a low rate of inflation may be inconsistent. The change in Britain from low unemployment and high inflation in the 1970s to high unemployment and a reduced rate of inflation in the 1980s and 1990s represents a shift along the Phillips curve. (DMS)
Reference Phillips, A.W.H. 1958: The relation between unemployment and rate of change in money wage rate in the UK, 1861-1957. Economica 25: 283-99; |
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