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Phillips Curve
AP Macroeconomics · Economic Fluctuations
The Inflation-Unemployment Tradeoff

The Phillips Curve models the inverse relationship between inflation and unemployment. A mirror to the AD/AS model.

Curve Mechanics
AD Shifts (Movement): A shift in Aggregate Demand causes movement ALONG the SRPC. (Tradeoff acts normally).
AS Shifts (Curve Shift): A shift in Aggregate Supply (SRAS) causes the ENTIRE SRPC itself to shift (Expected inflation changes).
Tags
Phillips CurveInflationStagflationMacroeconomics
Shift Aggregate Demand (AD)
Effect: Moves the dot ALONG the curve.
Shift Aggregate Supply (SRAS)
Effect: Shifts the ENTIRE SRPC curve.
Economy Status HUD
Inflation Rate: 2.0%
Unemployment: 5.0%
Long Run Equilibrium at Natural Rate of Unemployment (NRU).