Philips Curve

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Philips Curve

Philips Curve establishes an inverse relationship between inflation and unemployment and goes on to a state that if an economy wants low unemployment, it must be prepared for high rate of inflation and visa a Vis. This is because low unemployment would imply more workers getting jobs and wages which will result into a higher level of demand. This higher level of demand may lead to higher inflation. Whereas the case of high unemployment will result into a low level of demand causing Deflation.

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