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Inflation, Unemployment, and the Phillips Curve

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The Phillips curve—a statistical relationship between inflation and unemployment—is central to much of macroeconomic thought. Over the 1959–69 period, inflation and unemployment exhibit a negative relationship, tracing a nearly perfect curve. More recently (1984–93), the fit between them is somewhat looser, but still negative. To many economists, the Phillips curve suggests a trade-off between inflation and unemployment: A lower unemployment rate can be “bought” at the cost of somewhat higher inflation, and vice versa. This has aroused concern that the recent low jobless rates will raise inflation.

Suggested citation: “Inflation, Unemployment, and the Phillips Curve,” Federal Reserve Bank of Cleveland, Economic Trends, no. 97-12, pp. 05, 12.01.1997.

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