The Phillips Curve

Active learning works well for the Phillips Curve because it combines data skills with economic theory, letting students see the trade-off visually rather than memorize abstract graphs. When students plot real UK data from the 1960s, they connect the theory to historical outcomes, making the concept more tangible and memorable.

• Year 12
• Economics
• 4 activities
• 25 min–50 min

Learning Objectives

1. Analyze the graphical representation of the short-run Phillips Curve to identify the inflation-unemployment trade-off.
2. Evaluate the impact of specific supply shocks, such as the 1973 oil crisis, on the position of the short-run Phillips Curve.
3. Compare the implications of the short-run and long-run Phillips Curves for macroeconomic policy decisions.
4. Calculate the natural rate of unemployment based on the vertical long-run Phillips Curve.

Flipped Classroom

⏱ 30 min·Pairs

Pairs Activity: Plotting the SRPC

Give pairs UK quarterly data on inflation and unemployment from 1965 to 1980. Students plot points on graph paper, fit a curve, and label the trade-off. Pairs then predict outcomes from a demand shock and share with the class.

Prepare & details

Explain the short-run trade-off between inflation and unemployment as depicted by the Phillips Curve.

Facilitation Tip: For the Pairs Activity, provide printed UK data points from the 1960s so students plot accurately and trace the downward slope together.

Setup: Standard classroom, flexible for group activities during class

Materials: Pre-class content (video/reading with guiding questions), Readiness check or entrance ticket, In-class application activity, Reflection journal

• Understand
• Apply
• Analyze
• Self-Management
• Self-Awareness

Flipped Classroom

⏱ 45 min·Small Groups

Small Groups: SRPC Shift Simulation

Distribute event cards such as oil price rises or rising wage expectations to small groups. Groups draw an initial SRPC, apply events to shift it, and calculate new inflation-unemployment equilibria. Groups present shifts and vote on the most impactful event.

Prepare & details

Analyze the factors that can shift the short-run Phillips Curve.

Facilitation Tip: During the SRPC Shift Simulation, circulate with sticky notes to label shifts caused by supply shocks or expectation changes as groups present.

Setup: Standard classroom, flexible for group activities during class

Materials: Pre-class content (video/reading with guiding questions), Readiness check or entrance ticket, In-class application activity, Reflection journal

• Understand
• Apply
• Analyze
• Self-Management
• Self-Awareness

Flipped Classroom

⏱ 50 min·Whole Class

Whole Class Debate: Short-Run vs Long-Run Policies

Split the class into two teams: one advocating fiscal stimulus using SRPC logic, the other highlighting LRPC risks. Teams prepare arguments with graphs, debate for 20 minutes, then vote and debrief on policy credibility.

Prepare & details

Differentiate between the short-run and long-run Phillips Curves and their policy implications.

Facilitation Tip: For the Whole Class Debate, assign roles like central bank governor or trade union leader to ensure balanced arguments and student ownership of perspectives.

Setup: Standard classroom, flexible for group activities during class

Materials: Pre-class content (video/reading with guiding questions), Readiness check or entrance ticket, In-class application activity, Reflection journal

• Understand
• Apply
• Analyze
• Self-Management
• Self-Awareness

Flipped Classroom

⏱ 25 min·Individual

Individual Task: Personal Phillips Curve Model

Students receive recent ONS data. Individually, they construct a modern SRPC and LRPC on digital tools or paper, note potential shifts from Brexit, and write a short policy recommendation.

Prepare & details

Explain the short-run trade-off between inflation and unemployment as depicted by the Phillips Curve.

Facilitation Tip: In the Individual Task, provide graph templates with pre-labeled axes and space for annotations to guide precision and reflection.

Setup: Standard classroom, flexible for group activities during class

Materials: Pre-class content (video/reading with guiding questions), Readiness check or entrance ticket, In-class application activity, Reflection journal

• Understand
• Apply
• Analyze
• Self-Management
• Self-Awareness

Teaching This Topic

Teachers often start with the plotting activity to ground theory in concrete data, avoiding the trap of lecturing without visuals. Research suggests avoiding overemphasis on the long-run trade-off early on, as students grasp the short-run version more intuitively. Use real-world examples like the 1970s stagflation to link AD-AS to Phillips Curve shifts, reinforcing connections across topics.

What to Expect

Successful learning looks like students confidently explaining the difference between short-run and long-run trade-offs and using the graph to evaluate policy choices. They should analyze shifts in the curve, not just draw it, showing they grasp the role of expectations and supply shocks.

Watch Out for These Misconceptions

Common Misconception

During the SRPC Shift Simulation, watch for students assuming the Phillips Curve shifts only with demand policies, ignoring supply shocks or expectation changes.

What to Teach Instead

Use the simulation’s sticky notes to label shifts as demand-driven, supply-driven, or expectation-driven, prompting groups to justify their classifications with historical evidence.

Common Misconception

During the Pairs Activity, watch for students treating the Phillips Curve as a fixed long-run relationship rather than a short-run trade-off.

What to Teach Instead

Have pairs annotate their graphs with ‘short-run only’ and discuss why the curve’s slope disappears in the long run, using the natural rate as a reference point.

Common Misconception

During the Whole Class Debate, watch for students claiming lower unemployment always requires higher inflation permanently.

What to Teach Instead

Use the debate to contrast short-run gains with long-run risks by having students sketch revised Phillips Curves as expectations adjust, tying arguments to real-world outcomes.

Assessment Ideas

Quick Check

After the Pairs Activity, display a graph of a shifted SRPC and ask students to label the shift’s cause, using their plotted points and annotations as evidence.

Discussion Prompt

During the Whole Class Debate, circulate and listen for students using the Phillips Curve to justify both short-term policy choices and long-term risks, assessing their ability to balance trade-offs.

Exit Ticket

After the Individual Task, collect models and note whether students accurately labeled the SRPC, LRPC, and provided a policy-relevant explanation of the vertical long-run curve.

Extensions & Scaffolding

• Challenge early finishers to research a recent central bank policy decision and sketch how the SRPC may have shifted, explaining their reasoning.
• For students who struggle, provide a partially completed graph with one plotted point and one shift arrow to fill in collaboratively.
• Deeper exploration: Ask students to compare UK Phillips Curve data from the 1960s to a decade later, noting differences and linking to economic events.

Key Vocabulary

Short-Run Phillips Curve (SRPC)	A curve showing a short-term inverse relationship between inflation and unemployment. It suggests that policymakers can reduce unemployment at the cost of higher inflation, or vice versa.
Long-Run Phillips Curve (LRPC)	A vertical line at the natural rate of unemployment, indicating that in the long run, there is no trade-off between inflation and unemployment. Inflation can be higher or lower without affecting the unemployment rate.
Natural Rate of Unemployment	The unemployment rate that exists when the economy is at its potential output. It includes frictional and structural unemployment but not cyclical unemployment.
Inflation Expectations	The rate at which individuals and businesses anticipate future inflation. Changes in expectations can shift the short-run Phillips Curve.
Supply Shock	An unexpected event that affects an economy, either positively or negatively, such as a sudden increase in oil prices. These can cause stagflation, shifting the SRPC.