PlotIT - Phillips curve
In the short run, there seems to be an inverse relationship between inflation and unemployment. During the expansionary phase of the business cycle, unemployment falls but inflation rises. During the contractionary or slowdown phase, inflation falls but unemployment rises. This inverse relationship can be shown in a Phillips curve.
The period from 1987 to 1993 illustrates these effects. The UK economy was growing rapidly from 1987 to 1989, but then moved into recession. The following table shows inflation and unemployment in that period.
Plot the above figures on the following diagram by clicking on the diagram at the appropriate point for each part. When you have done this, click on 'Reveal' to show how a line of best fit can be plotted from this scatter of points.