Use the sticky-wage theory of aggregate demand to explain the short-run Phillips curve

The short run Phillips curve is a negatively sloped curve which shows that with rise in inflation rate the unemployment rate will fall. It also means that if inflation rises employment of labour will rise and thus unemployment will fall.

Now we can explain this short run phillips curve by sticky wage theory. In sticky wage model we can see that wage of labour cannot change immediately because most of the cases wages are contractual and wages cannot adjusted so easily due to social norms and notions.

Now when prices in the economy rises or inflation happens then Nominal wages of labour cannot change due to the sticky wage so that will actually leads to fall in purchasing power of labour which also means fall in labours real wage. So for firms labours are now cheaper to hire as real wage decreases now firm will hire more labours and produce more product as per unit production of a labour is still same. Thus when prices increases or inflation happens in the economy the unemployment rate will fall which Phillips curve represents.