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What is the inverse relationship between inflation and unemployment rates?
Wiki User
∙ 10y ago
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
Wiki User
∙ 15y ago
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What is the Phillips curve?
In economics it's the inverse relationship between inflation and unemployment.
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
Until the stagflation of the 1970s the Phillips curve seemed to prove an inverse relationship between inflation and what other variable?
Unemployment
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)
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 relationship between unemployment and inflation?
There has been an inverse relation between rate of inflation and the rate of unemployment in an economy. The more the entrepreneur extends the employment opportunity the more he has to pay to that particular factor of production and the more payment to factor of production the increase in the cost of producing a unit will be observed and in order to maintain the profitability of the product the entrepreneur will inflate the price of that product. A similar process will be observed through out the economy when the government intends to create job. The price of products or services, where the workforce is installed, will increase hence an increase in the rate of inflation will be visible through out the economy.It can be concluded from the aforesaid explanation that when a government intend to lower down the rate of unemployment it had to bear the increase rate of inflation in the national economy.
What are the effects of unemployment and inflation in Nigeria?
Unemployment and inflation are two intricately linked economic concepts. Over the years there have been a number of economists trying to interpret the relationship between the concepts of inflation and unemployment. There are two possible explanations of this relationship - one in the short term and another in the long term. In the short term there is an inverse correlation between the two. As per this relation, when the unemployment is on the higher side, inflation is on the lower side and the inverse is true as well. This relationship has presented the regulators with a number of problems. The relationship between unemployment and inflation is also known as the Phillips curve. In the short term the Phillips curve happens to be a declining curve. The Phillips curve in the long term is separate from the Phillips curve in the short term. It has been observed by the economists that in the long run the concepts of unemployment and inflation are not related. As per the classical view of inflation, inflation is caused by the alterations in the supply of money. When the money supply goes up the price level of various commodities goes up as well. The increase in the level of prices is known as inflation. According to the classical economists there is a natural rate of unemployment, which may also be called the equilibrium level of unemployment in a particular economy. This is known as the long term Phillips curve. The long term Phillips curve is basically vertical as inflation is not meant to have any relationship with unemployment in the long term. It is therefore assumed that unemployment would stay at a fixed point irrespective of the status of inflation. Generally speaking if the rate of unemployment is lower than natural rate, then the rate of inflation exceeds the limits of expectations and in case the unemployment is higher than what is the permissible limit then the rate of inflation would be lower than the expected levels. The Keynesians have a different point of view compared to the Classics. The Keynesians regard inflation to be an aftermath of money supply that keeps on increasing. They deal primarily with the institutional crises that are encountered by people when they increase their price levels. As per their argument the owners of the companies keep on increasing the salaries of their employees in order to appease them. They make their profit by increasing the prices of the services that are provided by them. This means there has to be an increase in the money supply so that the economy may keep on functioning. In order to meet this demand the government keeps on providing more money so that it can keep up with the rate of inflation.
Is the relationship between pressure and volume direct or inverse?
the relationship between pressure and volume a direct or inverse?
What is the relationship between aquaculture and water quality?
They have an inverse (negative) relationship.
What is similar between an inverse relationship and a linear relationship What is different?
decreases
Is their inverse relationship between quantity and price?
Yes.
What is the relationship between serum calcium and phosphate?
Inverse
