Originally Posted by Kamran Ahmed

The various branches of free-market economics (monetarist, rational expectations, supply-side, and Austrian) have made laudable attempts at dislodging the "new economics." Inroads have been made and early versions of crude Keynesianism have been persuasively refuted (e.g., the concept of the liquidity trap, that money does not matter, and that inflation and unemployment cannot coexist). But, in the words of G. K. Shaw, modern Keynesian theory "not only resisted the challenge but also underwent a fundamental metamorphosis, emerging ever more convincing and ever more resilient" (1988: 5). The remaining Keynesian precepts have achieved a certain kind of "permanent revolution," as Mark Blaug calls it, in the minds of most economists. WHAT'S LEFT? What forms the basis of this permanent revolution?

Originally Posted by newstudent

@Eshal

It is wrong that inflation and unemployment can't exist simultaneously. This is apparent in Pakistan as we see both of these phenomena. The existence of both problems is called stagflation. Stagflation derives its name from two concepts; inflation and unemployment (stagnation). Thus inflation and stagnation existence at the same time is referred to as stagflation.

The exact relation between the unemployment and inflation is negative i.e. if unemployment increases inflation will decrease and vice versa. The relation between these two variables is found by Philips, a British economist. This relation became very famous and is one of the cornerstones in the modern macroeconomics.

One word of caution; K.K. Dewet is not a standard economics book to follow. Try Abel and Bernanki (Macroeconomics) as this is easy one to follow.

Regards

Originally Posted by shtanzeel

Minor correction sir, Philips had given relationship between wages and unemployment origionaly. Not between P and U. Its later modifications