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Phillips Curve

A macroeconomic concept that shows the inverse relationship between inflation and unemployment, suggesting that lower unemployment can be associated with higher inflation.

A.W. Phillips

An economist who discovered the negative relationship between wage growth and unemployment in the U.K. in 1958, leading to the concept of the Phillips Curve.

De-anchoring of inflation expectations

The phenomenon where the public’s future inflation expectations become unstable or disconnected from past inflation trends.

Natural rate of unemployment

The level of unemployment consistent with a stable inflation rate, determined by factors such as labor market dynamics.

Wage Setting (WS) Curve

A curve that represents the wage rate relationship with unemployment, indicating how wages adjust based on unemployment levels.

Price Setting (PS) Curve

A curve that represents the price level set by firms, typically influenced by wages and other market factors.

Accelerationist Phillips Curve

A modification of the original Phillips Curve suggesting that the relationship between unemployment and inflation affects the rate of change in inflation over time.

Trade-off in policy

The concept that policymakers face a dilemma between achieving low unemployment and low inflation; improving one may worsen the other.

Expectations theory

The theory that people's expectations of inflation influence economic behavior and can impact the actual inflation rate.

Inflation rate (π)

The percentage increase in the price level over a period, reflecting how much prices have risen.