Question

explain phillips curves with diagram ? 8 marks ​

Answer 1

Answer:

step by step explanation

The Phillips curve given by A.W. Phillips shows that there exist an inverse relationship between the rate of unemployment and the rate of increase in nominal wages.

A lower rate of unemployment is associated with higher wage rate or inflation, and vice versa. In other words, there is a tradeoff between wage inflation and unemployment.

Reason: during boom, demand for labour increases. Due to greater bargaining power of the trade union, wage increases.

Thus, decrease in unemployment leads to increase in the wage (Fig. 13.6). But when wage increases, the firms cost of production increases which leads to increase in price. Therefore it is also called wage inflation, that is, decrease in unemployment leads to wage inflation.

hope this makes you understand...

Answer 2

Hey friend!

Here is your answer;


The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship. The theory claims that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.


The Phillips curve states that inflation and unemployment have an inverse relationship. Higher inflation is associated with lower unemployment and vice versa.


The concept behind the Phillips curve states the change in unemployment within an economy has a predictable effect on price inflation. The inverse relationship between unemployment and inflation is depicted as a downward sloping, concave curve, with inflation on the Y-axis and unemployment on the X-axis. Increasing inflation decreases unemployment, and vice versa. Alternatively, a focus on decreasing unemployment also increases inflation, and vice versa.

I hope it helps you and please refer to the attachment graph given (source : economicshelp)