This is the explanation of the Short Run Phillips Curve. In essence:

If governments want low unemployment, they can get it, as long as they accept higher inflation. Stimulating AD to lower unemployment creates a smaller pool of available workers, giving more power to workers in the wage negotiating process. This pushes up wages, which will push up firms’ costs, which will lead to them increasing prices, which increases cost of living and encourages workers to further push up their wages.
If governments allow unemployment to be higher, then inflation will be lower. High unemployment gives workers less negotiating power when determining wages, leading to lower wages, lower costs for firms, which means that firms can lower prices, leading to lower costs of living, leading to less need to negotiate high wages.

In effect: the SRPC illustrates that there is a trade-off governments make: get unemployment down at the expense of high inflation, or achieve low inflation at the expense of high unemployment.

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