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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.
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What is the relationship between unemployment and inflation?
The relationship between Inflation and the Unemployment Rate is known as the Phillips Curve.
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
Relationship between business cycle inflation and unemployment?
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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 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.
What are the relationship between inflation and deflation?
inflation is a situation when prices persistantly rise in the country on the other hand deflation is when there is excess supply of good in a country when we remove inflation then unemployment creat
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)
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.
How are inflation and unemployment relate.?
Inflation and unemployment are inversely related.
What is the relationship between money and inflation?
There is nearly a perfect, 1:1 relationship between inflation and the money supply. Generally, printing more money is the source of inflation.
