IB Economics: The Phillips Curve (HL) — Answered by an IB Educator

Start by stating which curve you need — short-run (SRPC) or long-run (LRPC) — because the question almost always hinges on that distinction. Draw the diagram with unemployment on the x-axis and inflation on the y-axis, label the natural rate of unemployment (NRU), then explain the trade-off or its absence using shifts, not just movements.

The short-run Phillips curve (SRPC) shows a genuine trade-off — lower unemployment is bought with higher inflation, based on sticky wages and adaptive expectations. The long-run Phillips curve (LRPC) is vertical at the natural rate of unemployment, because once expectations adjust, there's no permanent trade-off — only higher inflation with no lasting fall in unemployment.

The SRPC shifts when expected inflation changes — if workers and firms expect higher inflation, they build it into wage and price decisions, pushing the curve outward at every unemployment rate. Supply shocks, like an oil price spike, can also shift it, causing stagflation: higher inflation and higher unemployment simultaneously.

Stagflation — rising inflation alongside rising unemployment — happens when a negative supply shock (like an oil price surge) shifts the short-run aggregate supply curve left. On the Phillips curve, this shows up as the entire SRPC shifting outward, breaking the usual inverse relationship rather than moving along a fixed curve.

For HL Economics, expect "explain", "distinguish between", and "evaluate" attached to Phillips curve content, usually in paper 1 essays or paper 3 data-response questions. "Distinguish" demands a direct short-run vs long-run comparison; "evaluate" wants you to weigh whether the trade-off actually exists or if it's only temporary.

Yes — if the question mentions inflation and unemployment together, a correctly labelled Phillips curve diagram is expected and directly rewarded under the paper 1 markscheme's application criterion. Skipping the diagram when it's relevant is one of the most common ways HL students lose marks in this topic.

The single biggest mistake is drawing only the short-run curve when the question actually asks about the long run, or vice versa — examiners see this constantly. The second most common error is asserting a permanent trade-off exists, which contradicts the accepted long-run vertical curve and loses evaluation marks.

The Phillips curve appears mainly in Paper 1 (extended response, part of the macroeconomics theme) and can surface in Paper 3 HL-only quantitative questions involving inflation-unemployment data. According to the IB Economics guide (first assessed 2022, current for the 2025 exam cycle), it sits under the macroeconomics unit on the trade-off between inflation and unemployment.

It's conceptually harder than most HL macro topics because it requires you to hold two contradictory-looking ideas at once: a trade-off exists in the short run but vanishes in the long run. Students who treat it as one fixed diagram, rather than two related models, are the ones who struggle most.

Top-mark answers pair an accurately labelled diagram with a clear expectations-based explanation of why the curve shifts, then evaluate using a real-world example — the 1970s oil shocks or a specific country's recent inflation data work well. Weak answers stop at description; a 7 requires genuine synthesis and evaluation.

Yes — it's one of the most natural links in HL macro. Central banks aiming to control inflation via interest rates must consider where the economy sits on the SRPC, since aggressive tightening can push unemployment up before inflation falls, which is exactly the trade-off the curve illustrates.

HL Economics adds extra quantitative depth and topics — like this expectations-augmented Phillips curve model and HL-only Paper 3 questions — that SL students don't cover at all. It's not that HL is uniformly harder throughout, but the macro theory does go noticeably deeper, and the Phillips curve is one of the clearest examples.

The most useful thing you can do is ask your child to explain the diagram out loud, from scratch, without notes — if they can describe why the SRPC shifts without prompting, they've actually understood it rather than memorised a picture. Past paper practice under timed conditions matters more than re-reading notes.