Question

Explain the concept of the Phillips curve. Is there any difference between Milton Friedman’s and Keynesian views of the short-run Phillips curve?

Answer 1

Philip curve explains the inverse relationship between the inflation and employment. it says as the inflation in the market rises the unemployment in the market will fall.

Keynesian Philip curve is a downward sloping curve because the wages in the market are sticky i.e. if the price increase the real wages will fall and that will allow the firms to hire more decreasing the unemployment.

Milton Friedman's philip curve is a straight vertical line that represents long run philip curve, here wages are not sticky and the inflation will not have any effect on the unemployment.