What can be a consequence of achieving high employment according to the Phillips curve theory?

According to the Phillips curve theory, there is an inverse relationship between unemployment and inflation. This suggests that when unemployment is low and the economy is operating at or near full employment, the demand for goods and services increases. As businesses try to hire more workers to meet this demand, wage pressures build. Higher wages can lead to increased consumer spending, but they can also result in businesses raising prices to maintain profit margins, leading to inflation.

Therefore, when high employment is achieved, it can put upward pressure on inflation rates. Essentially, as various factors in the economy interact — such as increasing demand for labor causing wage growth — the consequence can often manifest as higher inflation. This relationship underscores the trade-off that policymakers may face when trying to balance low unemployment with stable prices.