Inflation And Unemployment The Relationship Between Research,

The relation between the inflation and unemployment is basic questions in economics, and is described by Phillips curve visually. In 1958, Professor A. W. Phillips proposed the relational curve between currency wage rate and unemployment rate, which is the Phillips curve primitive shape. In 1960, Samuelson .Paul and Solow .Robert proposed a revision to the Phillips curve, and changed the curve on relation between the currency wage rate and the unemployment rate in to inflation rate and the unemployment rate. This curve indicated the relation between the inflation rate and the unemployment rate is the substitution relations, namely that if unemployment rate is high, then the inflation rate is low, the inflation rate low unemployment rate is high. Samuelson .Paul and Solow .Robert not only proposed such revision to the Phillips curve, moreover they took the relation as " policies menus" ,and provides it to policy-maker. Policy-maker may act according to the relation between inflation rate and the unemployment rate, namely when the unemployment rate is high adopts the inflation policy. In the 20th century 70's, Phillips curve could not explain such reality, "the stagflation" in the economy of western nations. Thereupon, Friedman proposed a revision to the Phillips curve, and divided the Phillips curve into long-term and the short-term, and explained the short-term Phillips curve validity and long-term Phillips curve invalid with the adaptive expectation theory and the natural unemployment rate hypothesis, namely substitution relations between the inflation rate and the unemployment rate existed in the short-term, and didn't exist in the long-term. Afterwards, the rational expectation schools, led by Lucas, Sargen used t rational expectation hypothesis to deny the Phillips curve theory value and its practice significance thoroughly. But, the argument concerned about Phillips curve has not ever been stopped. The new Keynes schools defended the Phillips curve in order to stick up for Keynes mainstream status, and has made the new proof to support Phillips curve on the basis of absorbing...