Philips Curve

Posted in Finance, Accounting and Economics Terms, Total Reads: 2558

Definition: Philips Curve

In economics, Phillips curve gives an inverse relationship between rate of unemployment and inflation rate.

As unemployment increases, wages paid to workers reduces as there is more than sufficient supply of workers. This leads to lower consumption of resources thereby reducing inflation and vice versa.

With improved economic condition unemployment rate reduces which leads to increase in inflation.

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