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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%
During the great depression the overall unemployment rate was at what percent?
It seems that unemployment rate averaged between 8 percent and 35 percent in 1933, the worst year of the Depression for unemployment. That is non-farm workers. And, you have to remember that establishing the rate was not as accurate as it is today. Lots of people during the Depression simply did not appear on the unemployment rate because there was no way of keeping track of who was looking for work or who had just given up and "rode the rails." There was not unemployment insurance back then. Also the farmers lost all of there crops and hoover cut taxes and gave more crops to the farmers.
Is the statement 'Society faces a short-run tradeoff between inflation and unemployment' positive or normative?
positive
Is there a tradeoff between unemployment and inflation when the aggregate demand in an economy increases?
Yes, there is a tradeoff between unemployment and inflation when aggregate demand in an economy increases. As demand rises, businesses may need to hire more workers to meet the increased demand, leading to lower unemployment rates. However, if demand grows too quickly, it can also lead to inflation as businesses raise prices to match the higher demand. This tradeoff is known as the Phillips curve relationship.
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 is the typical relationship between inflation and unemployment?
The typical relationship between inflation and unemployment is known as the Phillips curve. It suggests that there is an inverse relationship between the two - when inflation is high, unemployment tends to be low, and vice versa. This means that as one decreases, the other tends to increase.
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.
How can one calculate the inflation rate using the unemployment rate as a key factor?
To calculate the inflation rate using the unemployment rate as a key factor, you can use the Phillips Curve. The Phillips Curve shows the relationship between inflation and unemployment. When unemployment is low, inflation tends to be higher, and vice versa. By analyzing this relationship, economists can estimate how changes in the unemployment rate may impact inflation.
What is the relationship between inflation and unemployment in the long run?
In the long run, there is a trade-off between inflation and unemployment known as the Phillips curve. This relationship suggests that as inflation increases, unemployment decreases, and vice versa. However, this trade-off is not always consistent and can be influenced by various economic factors.
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
