What is the relationship between inflation and unemployment

What is the relationship between inflation and unemployment in the short run according to the phillips curve. Explain.

Solution

As per the phillip curve , inflation and unemployment are inversely related. This means when prices in the economy rises , unmployment falls because economy starts demanding more goods and services increasing employment in the economy. However, the same relationship does not exist in the long run. This is why phillip curve is L shaped , inflation also impacts wage changes in the market.