The original Phillips Curve is consistent with a demand-pull story of inflation.

Question

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The original Phillips Curve shows an inverse relationship between unemployment and inflation. As unemployment decreases (i.e. there is a tighter labor market), wages increase due to increased competition for workers. This leads to businesses raising their prices to cover the higher labor costs, causing inflation to increase. This is a demand-pull story of inflation, where increased demand (in this case, for labor) leads to higher inflation.

The Original Phillips Curve Is Consistent with a Demand-Pull Story