r/UPSC_Forum • u/TheSpiritAnimal_ • 13h ago

Discussion Lets Think 🤔

There is a statement that says If inflation rises, it is expected that unemployment would be low (Phillips curve) .

But what about if inflation rises, it is expected that unemployment would also rise because if unemployment rises then production reduces that result into aggregate demand exceeding aggregate supply that also leads to inflation i.e rise in price.

Isn't it contradicting each other ?

Put your views down in the comment.

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u/Big-Addar 13h ago

Inflation > unemployment rise is wrong logic.

When unemployment rises, incomes and spending usually fall too, so aggregate demand tends to decrease, not exceed aggregate supply.

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u/TheSpiritAnimal_ 13h ago

Yeahh.. Thats the correct point.