The Relationship between Inflation and Unemployment: A Theoretical Discussion about the Philips Curve

Abstract

Inflation and unemployment are integral part of a market economy, with socioeconomic consequences for the population of the countries in which these processes occur. For most of the able-bodied population growing unemployment normally means catastrophe. Unemployment often brings terrible consequences, such as declining incomes and purchasing power, which in turn leads to an inability to raise their living standards. As for inflation, which many of us used to call "the enemy of society #1", its field of activity is increasing pricing of goods and services. For many emerging economies this phenomenon has the character of a disaster. The purpose of this article is to show the connection between inflation and unemployment, if this connection is significant, and which variables can define it. We will try to figure it out by analyzing different opinions of economists concerning the Philips curve, by constructing short-term and long-term Philips curves (basing on statistical data of The Russian Federation) by making some conclusions about the results at the end. We pay special attention in our research to the study of Phillips curve made by some economists of the last century.