The Philips curve is an economic concept that describes the inverse relationship between the unemployment rate and the inflation rate. The curve is named after economist A.W.H. Philips, who first observed this relationship in the UK in the 1950s. The basic idea behind the Philips curve is that as unemployment decreases, inflation increases, and vice versa.
NAIRU (non-accelerating inflation rate of unemployment) is the unemployment rate at which inflation is stable. It is also known as the "natural rate of unemployment" or the "structural unemployment rate." The NAIRU is the point on the Philips curve where the economy is in long-run equilibrium, where unemployment is at its lowest level without sparking an upward pressure on inflation. In other words, at the NAIRU, the economy is at full employment, and any further decrease in unemployment is likely to lead to inflation.
It's important to note that the Philips curve is not a stable relationship and can shift over time, making it difficult to use to predict the future. Additionally, the existence of NAIRU, and its level, is not always agreed upon by economists and can vary depending on the country or economy being studied.
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