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    Phillips Curve Relationship

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    Present a thorough analysis of the inverse relationship between inflation and unemployment reflected by the Phillips curve. Describe the importance of expectations and how they affect the actual relationship between the inflation rate and the unemployment rate. (one page)

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    https://brainmass.com/economics/unemployment/phillips-curve-relationship-629399

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    Step 1
    Empirical data was studied and it showed that inflation and unemployment have a stable and inverse relationship. This theory was developed by A W Phillips and is called the Phillips curve. According to this theory with economic growth comes inflation, which in turn should lead to more jobs and less unemployment (a). The inverse relationship between unemployment and inflation is shown as a downward sloping concave curve. The x-axis shows unemployment and the y-axis shows inflation rate. Higher inflation on the Phillips curve leads to lower unemployment and lower inflation on the Phillips curve leads to higher unemployment. The ...

    Solution Summary

    This posting gives you a step-by-step explanation of the inverse relationship between inflation and unemployment. The response also contains the sources used.

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