The Phillips Curve: Inflation and UnemploymentActivities & Teaching Strategies
This topic challenges students to see how economic theory meets real-world data, making active learning essential. Plotting real Australian figures helps students move beyond abstract graphs to grasp the lived trade-offs policymakers face. Through debate and simulation, they test assumptions and connect classroom theory to policy choices they read about in the news.
Learning Objectives
- 1Explain the short-run inverse relationship between inflation and unemployment as depicted by the Phillips Curve.
- 2Analyze the policy implications for the Reserve Bank of Australia when considering the short-run Phillips Curve trade-off.
- 3Critique the long-run validity of the Phillips Curve by referencing historical economic events like stagflation.
- 4Compare the short-run and long-run interpretations of the Phillips Curve, identifying the role of expectations.
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Data Plotting: Australian Phillips Curve
Provide ABS data on inflation and unemployment from 1990-2023. In small groups, students plot scatter graphs, draw the short-run curve, and identify trade-offs. Discuss shifts using recent events like COVID recovery.
Prepare & details
Explain the short-run relationship depicted by the Phillips Curve.
Facilitation Tip: During Data Plotting, ask students to note any years where unemployment and inflation both rose to prime them for the stagflation critique later.
Setup: Chairs arranged in two concentric circles
Materials: Discussion question/prompt (projected), Observation rubric for outer circle
Policy Debate: Inflation vs Unemployment
Divide class into teams: one prioritizes low inflation, the other low unemployment. Teams prepare arguments using Phillips Curve evidence, then debate with RBA chair moderating. Vote on best policy.
Prepare & details
Analyze the policy implications of the Phillips Curve trade-off.
Facilitation Tip: During the Policy Debate, assign roles like central banker, treasurer, and union leader so students argue from perspective rather than opinion.
Setup: Chairs arranged in two concentric circles
Materials: Discussion question/prompt (projected), Observation rubric for outer circle
Simulation Game: Expectations Adjustment
Pairs simulate short-run then long-run scenarios with cards representing demand shocks and wage expectations. Track inflation/unemployment paths on shared graphs. Reflect on vertical long-run curve.
Prepare & details
Critique the long-run validity of the Phillips Curve.
Facilitation Tip: During the Simulation, set a three-round limit to prevent overrunning and ask students to record inflation expectations after each round to track adaptation.
Setup: Flexible space for group stations
Materials: Role cards with goals/resources, Game currency or tokens, Round tracker
Critique Stations: Stagflation Cases
Set up stations with 1970s Australia, 2008 GFC, and 2022 data. Small groups analyze why Phillips Curve failed, noting expectations. Rotate and consolidate findings.
Prepare & details
Explain the short-run relationship depicted by the Phillips Curve.
Facilitation Tip: During Critique Stations, provide a timer to keep groups focused and rotate roles so every student contributes an observation.
Setup: Chairs arranged in two concentric circles
Materials: Discussion question/prompt (projected), Observation rubric for outer circle
Teaching This Topic
Start by anchoring the concept in familiar headlines about interest rates or unemployment, then let students wrestle with data before introducing theory. Emphasize the role of expectations early—students grasp sticky wages better when they feel the frustration of unrealistic pay claims in the simulation. Keep long-run analysis separate from short-run intuition to avoid cognitive overload.
What to Expect
By the end of these activities, students should be able to plot a Phillips Curve from data, explain why the trade-off is temporary, and evaluate policy choices using evidence. They should also distinguish demand-driven shifts from supply shocks and justify their reasoning with clear economic language.
These activities are a starting point. A full mission is the experience.
- Complete facilitation script with teacher dialogue
- Printable student materials, ready for class
- Differentiation strategies for every learner
Watch Out for These Misconceptions
Common MisconceptionDuring Data Plotting, watch for students who assume the curve will always slope downward in every graph they see.
What to Teach Instead
Use the plotted data to ask groups to identify at least one period where the curve shifted or flattened, then discuss why the long-run curve is vertical.
Common MisconceptionDuring Policy Debate, listen for arguments claiming unemployment can be permanently lowered without inflation effects.
What to Teach Instead
Have the opposing team present the simulation results showing how repeated demand shocks raise inflation expectations without sustainable job gains.
Common MisconceptionDuring Critique Stations, notice if students treat all inflation-unemployment movements as demand-driven.
What to Teach Instead
Point them to the stagflation case studies and ask them to explain why oil price spikes shift the curve outward rather than move along it.
Assessment Ideas
After the Policy Debate, pose the question: 'If the RBA observes rising inflation and falling unemployment, what policy action might they consider, and what are the potential risks of that action?' Facilitate a class discussion on the trade-offs involved using the debate outcomes as evidence.
During Data Plotting, provide students with a simplified graph showing a downward-sloping Phillips Curve. Ask them to label two points: one representing high unemployment and low inflation, and another representing low unemployment and high inflation. Then, ask them to explain why this trade-off might not hold in the long run.
After the Simulation, on an index card ask students to write one sentence explaining the short-run Phillips Curve and one sentence explaining why the curve is considered vertical in the long run. Collect these to gauge individual understanding of the core concepts.
Extensions & Scaffolding
- Challenge early finishers to research a recent RBA statement, identify any Phillips Curve references, and draft a 100-word analysis connecting the statement to current macroeconomic conditions.
- Scaffolding: Provide pre-labeled graph templates with key years already marked to help students focus on the curve’s shape rather than data entry.
- Deeper exploration: Ask students to compare Australia’s 1970s data with current trends and propose a hypothesis explaining any differences in the curve’s position.
Key Vocabulary
| Phillips Curve | A model showing a short-run inverse relationship between the rate of unemployment and the rate of inflation in an economy. |
| Natural Rate of Unemployment | The unemployment rate that exists when the economy is at its potential output, also known as the non-accelerating inflation rate of unemployment (NAIRU). |
| Stagflation | A period characterized by high inflation, high unemployment, and stagnant demand, which contradicts the typical Phillips Curve relationship. |
| Aggregate Demand | The total demand for goods and services in an economy at a given overall price level and a given time period. |
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