Economics & Business · Year 11

Active learning ideas

The Phillips Curve: Inflation and Unemployment

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.

• ACARA Content Descriptions
• ACARA Australian Curriculum v9: Economics (Years 11 and 12), Unit 3, the goals of government economic policy, including price stability, full employment (AC9AE016)
• ACARA Australian Curriculum v9: Economics (Years 11 and 12), Unit 3, the nature and causes of unemployment and inflation (AC9AE017)

• 35–50 min
• Pairs → Whole Class
• 4 activities

Activity 01

• Socratic Seminar
• 45 min · Small Groups

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.

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.

What to look for

Pose the question: 'Imagine the RBA observes rising inflation and falling unemployment. According to the short-run Phillips Curve, what policy action might they consider, and what are the potential risks of that action?' Facilitate a class discussion on the trade-offs involved.

• Analyze
• Evaluate
• Create
• Social Awareness
• Relationship Skills

Activity 02

• Socratic Seminar
• 50 min · Whole Class

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.

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.

What to look for

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.

• Analyze
• Evaluate
• Create
• Social Awareness
• Relationship Skills

Activity 03

• Simulation Game
• 35 min · Pairs

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.

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.

What to look for

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.

• Apply
• Analyze
• Evaluate
• Create
• Social Awareness
• Decision-Making

Activity 04

• Socratic Seminar
• 40 min · Small Groups

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.

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.

What to look for

Pose the question: 'Imagine the RBA observes rising inflation and falling unemployment. According to the short-run Phillips Curve, what policy action might they consider, and what are the potential risks of that action?' Facilitate a class discussion on the trade-offs involved.

• Analyze
• Evaluate
• Create
• Social Awareness
• Relationship Skills

A few notes on teaching this unit

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.

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.

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Watch Out for These Misconceptions

• During Data Plotting, watch for students who assume the curve will always slope downward in every graph they see.

  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.

• During Policy Debate, listen for arguments claiming unemployment can be permanently lowered without inflation effects.

  Have the opposing team present the simulation results showing how repeated demand shocks raise inflation expectations without sustainable job gains.

• During Critique Stations, notice if students treat all inflation-unemployment movements as demand-driven.

  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.

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Methods used in this brief

• Socratic Seminar
• Simulation Game