Alleged Tradeoff between Unemployment and Inflation

• 1958: New Zealand economist A. W. Phillips

• Inverse relationship between changes in money wage rates and unemployment rate

  • Phillips Curve (original 1958 formulation)

        | Changes in money wages
        |
        |     x
        |      x
        |       x
        |        x
        |         x
        |           x
        |             x
        |                x
        |                   x
        |                       x
        |---------------------------x----------------------------
        |                               x       Unemployment rate
        |