Evaluate the relationship between unemployment and inflation in the context of the Phillips Curve. Provide a detailed explanation of the Phillips Curve concept and how it demonstrates the trade-off between unemployment and inflation. Discuss the validity of this relationship in the short run versus the long run, citing historical economic examples. Also, explore how factors like expectations and supply shocks can influence this trade-off and potentially lead to scenarios like stagflation.

Answer rating: 100% (QA)

The Phillips Curve is a graphical representation of the inverse relationship between unemployment and inflation in an economy The curve shows that as unemployment falls inflation tends to rise and vic... View the full answer