What is the Philips Curve?

Philips Curve shows the inverse relationship between inflation and unemployment. So as unemployment decreases inflation rises.

This is because when unemployment is low, firms have to increase wages to compete for workers. For firms, higher wages means higher costs which they may pass on to the consumer as higher prices i.e firms may increase price so to ensure they make the same level of profit despite the increased cost. Increase in price is the inflation.

KL
Answered by Kalpana L. Economics tutor

4359 Views

See similar Economics GCSE tutors

Related Economics GCSE answers

All answers ▸

What is an oligopoly?


Please show, using a diagram with explanation, the effect on the UK market for t-shirts of a flood in Bangladesh, a leading cotton growing nation.


Explain why the demand for food has an inelastic PeD.


What is productive efficiency?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences