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In normal cirucmstances is there a short run tradeoff between the rate of inflation and the rate of unemployment?
Wiki User
∙ 15y ago
Yes. Inflation causes businesses to have to cut costs, and labor is one of the easily cuttable costs. See the Phillips Curve.
Wiki User
∙ 15y ago
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Why was it so difficult to find an effective solution to inflation problems between 1964 and 1983?
It is due to the nature of economic policy. Normally inflation and unemployment are inversely related, so policy decisions can be made to cure one at the expense of the other (for instance, raising of interest rates lowers inflation but risks stifling business growth). During the period between 1964 and 1983, we experienced "stagflation" (high unemployment AND high inflation). So when we experience both at the same time, policy makers have their hands tied as to what to do. If they decide to try to get inflation lower, they risk making unemployment worse (and it's already bad) and if they try to get employment lower, they risk making inflation worse.
What caused the rapid drop in unemployment between 1939 and 1945?
H
What is the difference in inflation between Ancient Rome and America?
The increase in the cost of goods within the economy.
If the CPI for transportation was 112.7 in 1970 and 243.7 in 1980 what was the inflation rate for transportation between 1970 and 1980?
116.2%
What was one similarity between France during the 1790's and Germany during the 1920's?
Severe inflation contributed to the rise of radical political groups
Is the statement 'Society faces a short-run tradeoff between inflation and unemployment' positive or normative?
positive
What does the Phillip's Curve illustrate?
A graph that shows that there is a relation between unemployment and inflation: One can either have a high inflation and low unemployment or low inflation with high unemployment.
If inflation falls why would unemployment rise?
When economists look at inflation and unemployment in the short term, they see a rough inverse correlation between the two. When unemployment is high, inflation is low and when inflation is high, unemployment is low. This has presented a problem to regulators who want to limit both. This relationship between inflation and unemployment is the Phillips curve. The short term Phillips curve is a declining one. Fig 2.4.1-Short term Phillips curveThis is a rough estimation of a short-term Phillips curve. As you can see, inflation is inversely related to unemployment. The long-term Phillips curve, however, is different. Economists have noted that in the long run, there seems to be no correlation between inflation and unemployment.
What is the Phillips curve?
In economics it's the inverse relationship between inflation and unemployment.
How do monetary policy control inflation?
Monetary policy can have an impact of inflation. The ideal state of the economy is a balance between inflation and unemployment at 4.3% which is only seen in a wartime economy.
Which way does the Phillips curve slope?
The Phillips Curve is an inverse relationship between the rate of unemployment in an economy and the inflation. The lower the unemployment is, the higher inflation we get! Thus we can say that the Phillips Curve is negative (downward sloping)
Phillips curve tradeoff make it difficult for fiscal policy?
The Phillips curve actually does not technically exist, although a modified, expectations Phillips curve does hold empirically. Moreover, the curve demonstrates a trade-off between unemployment and inflation. Essentially, the premise is that fiscal policy cannot solve inflation and unemployment. However, the curve does not hold after the 1960s, and many case studies show fiscal policy can solve both issues to a degree, or at least increase both at the same time.
Describe and give reasons for the relationship that exists between RGDP inflation and umeployment?
It is an inverse relationship. As inflation increases, unemployment decreases. This can be shown by the Phillips curve
In the long run there is no trade off between inflation and unemployment substaniate with appropiate theory?
yes true
What is the inverse relationship between inflation and unemployment rates?
They are inversely related. High unemployment means lots of people don't have jobs. Because they don't have jobs their incomes are low. Low incomes means they can't spend much money on products. This means that demand in the economy will fall. This fall in demand will drive producers to lower prices...and therefore inflation falls. So... High unemployment = low inflation Low unemloyment = higher inflation
Until the stagflation of the 1970s the Phillips curve seemed to prove an inverse relationship between inflation and what other variable?
Unemployment
What do you mean by Philip curve?
Phillips curve defines the relationship between the changes in the rate of employment towards inflation. This is an economic concept that shows how unemployment affects and raises the rate of inflation.
