What is the Phillips Curve?

There’s a lot of talk about the “Philips Curve” in regard to the Fed decision. What is the “Philips Curve”?

First, keep in mind it is an economic theory. A theory an is idea that is suggested or presented as possibly true but that is not known or proven to be true. A theory is a general belief about something works.

Investopedia explains the “Philips Curve”:

“An economic concept developed by A. W. Phillips stating that inflation and unemployment have a stable and inverse relationship. According to the Phillips curve, the lower an economy’s rate of unemployment, the more rapidly wages paid to labor increase in that economy.

The theory states that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment. However, the original concept has been somewhat disproven empirically due to the occurrence of stagflation in the 1970s, when there were high levels of both inflation and unemployment.”

Source: Investopedia

Another great explanation from Khan Academy if you have 9 minutes to watch:

Here be dragons!

“Here be dragons” means dangerous or unexplored territories, in imitation of the medieval practice of putting dragons, sea serpents and other mythological creatures in uncharted areas of maps.

Most people fully accept paranormal and pseudoscientific claims without critique as they are promoted by the mass media. Here Be Dragons offers a toolbox for recognizing and understanding the dangers of pseudoscience, and appreciation for the reality-based benefits offered by real science. Real science is a process for proving something to have predictive ability through a process of testing.

The video below titled “Here Be Dragons” is an outstanding 40-minute video introduction to critical thinking. Watch it and see how you start to think more critically about what you believe.

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