In its standard modern macroeconomic form, the Phillips curve depicts the…

Concept

The short-run Phillips curve expresses an inverse relationship between price inflation and cyclical unemployment. When labor-market slack falls, wage and price pressures tend to rise; when slack increases, those pressures tend to ease.

This relationship is not a permanent trade-off. Expected inflation and supply shocks can shift the curve, and in the long run unemployment tends toward its natural rate.

Application

The stem specifies the standard modern macroeconomic form and the short run. Its two axes are therefore inflation and unemployment, with lower unemployment generally associated with higher inflation over that horizon.

Contrast

• Wage growth and productivity concerns how worker compensation changes relative to output per worker.

• Unemployment and wage growth describes the original wage-change formulation associated with A. W. Phillips, rather than the modern price-inflation form specified here.

• Inflation and interest rates concerns monetary-policy responses and borrowing costs, not the two variables plotted on this curve.

Result

Thus, the requested relationship is between inflation and unemployment.