Q. Augmented Phillips curve?

Remember that Phillips curve, as it was incorporated into the Keynesian model, presumed a stable relationship between wage inflation andunemployment: for a given level of unemployment (say U = 5%), a given level of wage inflation would apply (say Π_w = 4%). As U increased, Π_w would fall and vice versa.

Mathematically, Phillips curve may be explained by a decreasing function f as Π_w = f(U). In neo-classical synthesis, expected inflation is added and Π_w = f(U) + Π^e. To justify this amendment, imagine U = 5% and Π_w = 4% (so that we are on Phillips curve) and expected inflation rises from 4% to 6%. As employees care about real wages, it's reasonable to presume that Π_w will increases as well (for a given U) and Phillips curve will shift upwards. 

Figure: The augmented Phillips curve

According to synthesis, Phillips curve should be drawn for a given value of Π^e and it should be shifted upwards (downwards) as Π^e increases (decreases). When position of Phillips curve is allowed to depend on Π^e, is known as augmented Phillips curve (or expectations-augmented Phillips curve). This amendment to Phillips curve is actually a consequence of a criticism of conventional Phillips curve and Keynesian model from the late 1960's (Keynesian - Monetarism debate).