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Philips Curve Formula

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Philips Curve is an economic theory that states that inflation and unemployment have a stable and inverse relationship. Check FAQs

λ t = λ e - β \cdot (U t - U n)

λ_t - Philips Curve?λ^e - Expected Inflation?β - Fixed Positive Coefficient?U_t - Unemployment Today?U_n - Unemployment at Natural Rate?

Philips Curve Example

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With units

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Here is how the Philips Curve equation looks like with Values.

Here is how the Philips Curve equation looks like with Units.

Here is how the Philips Curve equation looks like.

500000 = 1E+6 - 1000 \cdot (5000 - 4500)

500000 = 1E+6 - 1000 \cdot (5000 - 4500)

500000 = 1E+6 - 1000 \cdot (5000 - 4500)

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Philips Curve Solution

Follow our step by step solution on how to calculate Philips Curve?

FIRST Step Consider the formula

λ t = λ e - β \cdot (U t - U n)

Next Step Substitute values of Variables

∴

λ t = 1E+6 - 1000 \cdot (5000 - 4500)

Next Step Prepare to Evaluate

∴

λ t = 1E+6 - 1000 \cdot (5000 - 4500)

LAST Step Evaluate

∴

λ t = 500000

Philips Curve Formula Elements

Variables

Philips Curve

Philips Curve is an economic theory that states that inflation and unemployment have a stable and inverse relationship.

Symbol: λ_t

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Philips Curve

Expected Inflation

Expected Inflation is simply the rate at which consumers, businesses, investors expect prices to rise in the future.

Symbol: λ^e

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Expected Inflation

Fixed Positive Coefficient

Fixed Positive Coefficient means that the value of the coefficient is independent and greater than zero.

Symbol: β

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Fixed Positive Coefficient

Unemployment Today

Unemployment Today means the rate of unemployment in an economy in today's scenario.

Symbol: U_t

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Unemployment Today

Unemployment at Natural Rate

Unemployment at Natural Rate refers to the minimum unemployment rate stemming from real or voluntary economic forces.

Symbol: U_n

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Unemployment at Natural Rate

Other formulas in Microeconomics category

Go Average Total Cost

ATC = \frac{Tc}{Q}

Go Gross Domestic Product

GDP = PCN + GI + G + NX

Go Rate of Inflation

R = \frac{ECPI - ICPI}{ICPI}

Go Net Exports of Goods and Services

NX = X - M

How to Evaluate Philips Curve?

Philips Curve evaluator uses Philips Curve = Expected Inflation-Fixed Positive Coefficient*(Unemployment Today-Unemployment at Natural Rate) to evaluate the Philips Curve, Philips Curve states an inverse relationship between inflation and the unemployment rate. As in, the higher the economy’s inflation rate, the lower the unemployment rate will be, and vice-versa. Philips Curve is denoted by λ_t symbol.

How to evaluate Philips Curve using this online evaluator? To use this online evaluator for Philips Curve, enter Expected Inflation (λ^e), Fixed Positive Coefficient (β), Unemployment Today (U_t) & Unemployment at Natural Rate (U_n) and hit the calculate button.

FAQs on Philips Curve

What is the formula to find Philips Curve?

The formula of Philips Curve is expressed as Philips Curve = Expected Inflation-Fixed Positive Coefficient*(Unemployment Today-Unemployment at Natural Rate). Here is an example- 500000 = 1000000-1000*(5000-4500).

How to calculate Philips Curve?

With Expected Inflation (λ^e), Fixed Positive Coefficient (β), Unemployment Today (U_t) & Unemployment at Natural Rate (U_n) we can find Philips Curve using the formula - Philips Curve = Expected Inflation-Fixed Positive Coefficient*(Unemployment Today-Unemployment at Natural Rate).

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Philips Curve Formula

Philips Curve Example

Philips Curve Solution

Philips Curve Formula Elements

Other formulas in Microeconomics category

How to Evaluate Philips Curve?

FAQs on Philips Curve

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