IB Phillips Curve

Master the IB Phillips Curve with case studies, diagrams, and linked analysis on inflation, unemployment, and trade-offs.

The Phillips Curve is one of those beautifully frustrating models that seems to work - until it doesn’t. Understanding its short-run and long-run forms, plus how it links to monetary and fiscal policy, is essential for Paper 1 and Paper 3 success.

Use this page to find all the resources, examples, diagrams, and evaluations you need to crush this part of the syllabus.

Full breakdowns of diagrams and evaluation tools are available exclusively in the IB Economics course.

Relationship between Inflation and Unemployment The Phillips Curve

Organised Post Index

Start Here: What Is the Phillips Curve?

When Prices Drop but So Does Your Mood: The Devious Truth About Deflation

Think falling prices sound amazing? Learn why deflation might actually wreck the economy and how to nail this tricky concept in your IB Economics exams!

Economic Tug-of-War: When Macro Goals Clash

Discover the four major trade-offs in macroeconomics with real-world examples. Perfect for IB Economics students navigating conflicting policy objectives!

Real-World Case Studies: The Phillips Curve in Crisis

1970s Stagflation: When the Curve Broke

In the 1970s, many economies - especially the US and UK - faced stagflation: high inflation and high unemployment at the same time. This directly contradicted the short-run Phillips Curve, which predicted a trade-off.

Key Cause: Supply-side shock from OPEC oil embargo (1973), which spiked energy prices and reduced productive capacity.

IB Takeaway: Shows that cost-push inflation can shift the Phillips Curve outward, leading to both inflation and unemployment. A major challenge to Keynesian thinking and a win for Monetarist models.

Covid Recovery & The Flattening Curve (2020–2024)

After initial Covid lockdowns caused a global recession, recovery brought inflation back - but without a clear drop in unemployment. Central banks in the US, UK, and EU faced high inflation and low joblessness simultaneously, puzzling economists.

Key Factors:

Global supply chain disruptions
Massive stimulus packages
Labour market mismatches and shortages

IB Takeaway: Evidence that the Phillips Curve may have flattened - inflation and unemployment appear less strongly linked in modern economies. Good for evaluation in HL essays.

Japan’s Flat Phillips Curve (1990s–2020s)

Japan’s economy has shown low inflation and persistent unemployment since the 1990s, despite repeated attempts at stimulus. Even ultra-low interest rates and large fiscal injections failed to produce the expected inflationary pressure.

Key Factors:

Demographic decline (ageing population)
Deflationary expectations
Structural unemployment

IB Takeaway: Japan is often cited as proof that expectations, demographics, and structural factors can override the traditional Phillips Curve. Excellent case for HL evaluation or Paper 3 discussion.

HL Analysis: Phillips Curve + Policy

Connect macroeconomic policy with inflation-unemployment dynamics.

Phillips Curve and Monetary Policy: To Raise Rates or Not?
Fiscal Policy, Supply-Side Shifts, and the Long-Run Curve

These posts help you:

Economic Tug-of-War: When Macro Goals Clash

Analyse policy trade-offs
Link AD/AS and the Phillips Curve clearly
Avoid simplistic responses in HL evaluation

Evaluation: Is the Phillips Curve Still Useful?

This is a classic 10-mark or 15-mark question, especially at HL.

Compare short-run and long-run frameworks
Evaluate using real evidence
Include modern counterarguments (e.g., inflation expectations, globalisation, digitalisation)

Final Thought

If there’s one thing IB Economics loves, it’s a good model - and if there’s one thing it loves even more, it’s tearing it apart. Use this page to find everything you need to master the Phillips Curve from every angle - with examples, and real IB-level evaluation.