Final answer:
The Phillips curve shows the relationship between inflation and unemployment. In the short run, higher unemployment is associated with lower inflation, and vice versa. During an economic boom, the economy is typically operating above its potential GDP, represented by a point on the short-run Phillips curve to the left of the natural rate of unemployment.
Step-by-step explanation:
The Phillips curve is a graphical representation of the relationship between inflation and unemployment. In the short run, there is an inverse tradeoff between these two variables, meaning that higher unemployment is associated with lower inflation, and vice versa. This is represented by a downward sloping short-run Phillips curve. In the long run, however, there is no tradeoff between inflation and unemployment, and the Phillips curve becomes a vertical line at the natural rate of unemployment.
During an economic boom, the economy is typically operating above its potential GDP, and unemployment is low. This would be represented by a point on the short-run Phillips curve that is to the left of the natural rate of unemployment. However, in the long run, as the economy adjusts and returns to its potential GDP, the Phillips curve remains at the natural rate of unemployment, indicating no tradeoff between inflation and unemployment.