The relation between Inflation and Unemployment The modern Phillips curve that economists use today differs in three ways from what Phillips examined First, the modern Phillips curve substitutes price inflation for wage inflation. This substitution is reasonable(since price inflation and wage inflation often move together)
The Relation between Inflation and Unemployment • The modern Phillips curve that economists use today differs in three ways from what Phillips examined. – First, the modern Phillips curve substitutes price inflation for wage inflation. This substitution is reasonable (since price inflation and wage inflation often move together)
The relation between Inflation and Unemployment Second. the modern Phillips curve includes expected inflation Third. the modern Phillips curve include the supply shock
The Relation between Inflation and Unemployment – Second, the modern Phillips curve includes expected inflation. – Third, the modern Phillips curve include the supply shock