<Table> <Tr> <Td> </Td> <Td> This article needs additional citations for verification . Please help improve this article by adding citations to reliable sources . Unsourced material may be challenged and removed . (October 2011) (Learn how and when to remove this template message) </Td> </Tr> </Table> <Tr> <Td> </Td> <Td> This article needs additional citations for verification . Please help improve this article by adding citations to reliable sources . Unsourced material may be challenged and removed . (October 2011) (Learn how and when to remove this template message) </Td> </Tr> <P> The Phillips curve is a single - equation empirical model, named after William Phillips, describing a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result within an economy . Stated simply, decreased unemployment, (i.e., increased levels of employment) in an economy will correlate with higher rates of inflation . </P> <P> While there is a short run tradeoff between unemployment and inflation, it has not been observed in the long run . In 1968, Milton Friedman asserted that the Phillips curve was only applicable in the short - run and that in the long - run, inflationary policies will not decrease unemployment . Friedman then correctly predicted that in the 1973--75 recession, both inflation and unemployment would increase . The long - run Phillips curve is now seen as a vertical line at the natural rate of unemployment, where the rate of inflation has no effect on unemployment . In recent years the slope of the Phillips curve appears to have declined and there has been significant questioning of the usefulness of the Phillips curve in predicting inflation . Nonetheless, the Phillips curve remains the primary framework for understanding and forecasting inflation used in central banks . </P>

The short−run phillips curve shows a relationship between the