economics medium True/False

The Phillips Curve illustrates an inverse relationship between the rate of inflation and the rate of unemployment in the short run.

  1. True
  2. False

Answer: True

A.W. Phillips observed that when unemployment is low, wages tend to rise faster, leading to higher inflation. Conversely, high unemployment suppresses wage growth and inflation. However, Milton Friedman later argued this trade-off only exists in the short run, becoming vertical in the long run.

Topic Macroeconomics - Curves
Exam Relevance UPSC Prelims, SSC CGL, Banking
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