The short-run Phillips curve is based on the classical dichotomy.

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The short-run Phillips curve illustrates an inverse relationship between inflation and unemployment, suggesting that lower unemployment can come at the cost of higher inflation, and vice versa. This concept does not rely on the classical dichotomy, which separates real and nominal variables, assuming that changes in the money supply only affect nominal variables and not real variables like output or unemployment. The Phillips curve, especially in the short run, challenges this by showing how monetary policy (a nominal change) can affect real outcomes like employment.

The Short-Run Phillips Curve Is Based on the Classical Dichotomy