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Unformatted text preview: causing the prices of goods and services to increase. In other words, Phillips showed that unemployment and inflation shared an inverse relationship: inflation rose as unemployment fell, and inflation fell as unemployment rose. Since two major goals for economic policy makers are to keep both inflation and unemployment low, Phillip's discovery was an important conceptual breakthrough, but also posed a troublesome challenge: how to keep both unemployment and inflation low, when lowering one results in raising the other? The Phillips Curve Phillips' discovery can be represented in a curve, called, aptly, a Phillips curve....
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- Fall '10