Rising unemployment means lower inflation and falling unemployment means higher inflation.Do you agree??

Question

Inflation originates in Labour Market.
Inflation serves the critical social purpose of resolving incompatible demands of different groups.
RBI should reduce the interest rates after parliamentary election is over.There should be 10% unemployment and
10% inflation to make the money sound.

Answer 1

Rising unemployment means tend to lower inflation and falling unemployment means tend to higher inflation.
Yes.

Answer 2

Employment is one of the factors linked to inflation, but there are others as well. The size of the money supply is also a factor, which is basically determined by the interest rate set by the Federal Reserve. The level of productivity is another factor, which has a lot to do with the rate of implementing automation of the work environment. Disruptions in the production chain such at labor disputes, increasing transportation costs and so on. In the case of food, which is after all a fairly large chuck of the economy, the weather can have a huge influence on inflation. Government spending on non-productive activities such as war is a factor. I am sure there are more known factors and there is the very real possibility that not even very smart economists have it all figured out.

Answer 3

Its not that simple. Increasing the money in the economy will reduce unemployment by increasing jobs, on the other hand, the higher level of money chasing a limited amount of goods is bound to cause an increase in inflation. However, it is possible (theoretically, at least) to balance the two ends. If the increase in money in the economy coincides with an increase in productivity, there will be no increase in inflation. It is a balancing act, and the Federal Reserve seems to be doing a good job until now. I totally disagree with 10% for both inflation or unemployment.

Answer 4

When talking about inflation alot of people will mention Jimmy Carter and stagflation. But how did it get there? The oil embargo of 1973 sent shock waves through the economy like never before. If the price of a barrel of oil is $6 and jumps to $ 39 is six short years, not even Ronald Reagan would control that, neither would George W. Bush. Thirty years later and the same problem exists...we're too dependent on Mid-East oil. Today if oil jumped over 600% in a few short years, how would you delliver the goods without causing inflation? It is a balancing act, I agree...but when talking of Carter , we should put it in some kind of context... not just asign blame. Had Ronald Reagan been elected in '76' he would not have won re-election.

Answer 5

That's a symptoms, but not the cause. In the 1970s there was massive inflation in the U.S. President Regan crashed the economy and unemployment rose, but inflation went away and hasn't been that serious since.

There are other ways to create inflation though. In Latin America, to pay off debt, the government would just print money. Too much money caused massive inflation in the area. What they had to do was print new money with less zeros in them. Another cure is to peg the money to more stable money. That's why some money is pegged to the U.S. dollar and the Euro. Money use to be pegged to silver and gold.

Another way to get rid of inflation is to tax. President Regan, Clinton and Bush Sr. created more taxes and bigger government. Since the money was out of the system, yet more jobs were available, this lowered unemployment and inflation.

Answer 6

Usually goes the other way. Inflation lowers the value of money as compared to other ones. Not a sound thing. Some inflation keeps prices going up without MNCs having to do anything but tack a surcharge to cost increases. the resultant cash flow increase allows smaller businesses (mom-and-pops) to hire more people because their business expands.

If productivity also rises, then wages can also rise without adding more inflationary pressure.

Answer 7

Not at all.

Compare the Dems and Carter's high unemployment and high inflation with Bush's economy.

End of story.

Answer 8

That's only part of it. Rising worldwide demand increases inflation. And we do live in a global economy.

Answer 9

Typically yes but there are other mitigating factors involved. During carter's term we had high inflation and high unemployment. During Clinton/Bush we have had low unemployment and low inflation.

Answer 10

Yes, I agree. But, that's just to simple an answer. Wizards second rule will have a field day if you were in charge and tried to implement your idea.