Discuss the analytical foundations of the Phillips curve Essay

Discuss the analytical foundations of the Phillips trend - Essay Examplemost of the policy makers believed that unemployment and inflation could not occur at the same duration and whichever occurred, it became a major determinant of the policies that would be adopted by a given economic system. Anformer(a) pop out that the economists believed was that it was possible to achieve one objective without having negative implications on the other. However, the research that Philips undertook in 1958 provided information that generated quite a a number of questions to those assumptions. On his part, Philips used the available UK data to make an analysis on the judge of inflation and unemployment in UK. After plotting the result of the research, Philips noted that there existed an inverse relationship between rent inflation and unemployment. As a way of checking the relevance of the Philips conclusion, other economists used price inflation kind of of wage inflation and noted that the results were similar curves and this became the origin of the Philip curve. This paper seeks to discuss the analytical foundations of the Phillips curve as well as how unemployment rate of 5% may be inflationary in one country, spell it is deflationary in another country.According to the curve, any change in the level of unemployment produced a predictable as well as direct impact on the level of price inflation. Philips, together with other policy makers adopted the relationship between the two variables and noted that an maturation in aggregate pauperization as well as fiscal stimulus in the economy triggers various responses. First, they noted that an increase in demand as the spending by the government rises results into national growth. This is followed by falling on the pool of unemployed. On their part, firms will be involved in competing for fewer workers available in the economy by increasing their nominal wages making the workers to have a higher bargaining military f orce as they seek to have their nominal wages raised further (Forder, 2014). As the economy gets expert to full capacity,