What is the relationship between inflation and unemployment?
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
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.