Relationship Between Unemployment and Inflation ECO 203: Principle of Macroeconomics

In 1958 A.W.  Phillips evaluated the relationship between unemployment and inflation, noticing that they had a steady inverse effect on each other.  This analysis would later be known as the Phillips curve.  Examining the long-run and short-run relationships between unemployment and inflation allows economists to predict price levels, as well as aggregate demand and supply.  The Phillips curve has been used and is still used today by monetary policymakers to forecast the fluctuations of inflations and unemployment.  
The relationship between inflation and unemployment has a history of being inversely related.  The relationship is based off of the supply and demand for labor.  When there are more...