Long Run Phillips Curve

Definition

The Long Run Phillips Curve represents the relationship between inflation and unemployment in the long run. It shows that there is no trade-off between inflation and unemployment in the long run, meaning that increasing or decreasing inflation does not have a significant impact on reducing or increasing unemployment.

Analogy

Imagine you're running a marathon. In the beginning, you might be able to increase your speed by sacrificing some energy, but eventually, you'll reach a point where pushing harder doesn't make you any faster. Similarly, in the long run, adjusting inflation rates won't have a lasting effect on reducing unemployment.

Related terms

Inflation: The general increase in prices of goods and services over time. (e.g., rising costs of groceries)

Unemployment: The state of being without a job when actively seeking employment. (e.g., someone who recently got laid off)

Short Run Phillips Curve: Represents the relationship between inflation and unemployment in the short run.