Phillips collected data on the rate of change in nominal wages and plotted them against the UK unemployment rate. It shows that there is an inverse proportional relationship.
Higher inflation is associated with lower unemployment and vice versa. The Phillips curve, a concept that guided macroeconomic policy in the 20th century, was challenged by stagflation in the 1970s.
The Phillips curve shows the relationship between inflation and unemployment. When unemployment is low, inflation is high, and when unemployment is high, inflation is low.
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