The Phillips curve shows the relationship between

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The Phillips curve shows the inverse relationship between the unemployment rate and the inflation rate in an economy. As unemployment decreases, the competition for workers increases, leading to higher wages and production costs for firms. This creates pressure on firms to raise prices to maintain profits, resulting in higher inflation. Conversely, when the unemployment rate increases, the competition for jobs decreases, leading to lower wages and production costs for firms. This reduces the pressure on firms to raise prices, resulting in lower inflation.

The Phillips Curve Shows the Relationship Between