Relation Between Inflation Rate and Unemployment - 1776 Words

Eurozone unemployment and inflation both rise 01 March 2012 by Daniel Mason Eurozone unemployment rose to a record high in January, while inflation in the currency bloc has also continued its upward trend - a combination described by economists as unpalatable and a double whammy of bad news. The jobless rate in the 17-member currency bloc was 10.7 per cent in January, up from 10.6 per cent in December, according to statistics published today by Eurostat. It means that, in January, there were 16.9 million people out of work in the eurozone. Meanwhile in the European Union as a whole, unemployment increased from 10 per cent in December to 10.1 per cent in January, leaving 24.3 million people without a job. Spain continued to†¦show more content†¦A rise in income will create increased purchasing power. Thus, the demand remains high as it reaches a point where the supply can no longer meet the demand, inflation occurs. However, at the same time, when unemployment is high, workers are unable to ask for better wages. This means that prices can fall, since businesses are not having to pay their employees better wages. Therefore, in many cases, when there is low unemployment, there is high inflation and vice versa. It has been observed that there was a stable and inverse relationship between rate of inflation and the rate of unemployment in an economy. In other words, a lower unemployment rate could be had by tolerating a higher rate of inflation. However, since the simultaneous occurrence of high inflation and high unemployment in the United States and other countries during the 1970s, there has been general agreement that this econometric relationship is unstable. Indeed, the instability has been so great that Lucas and Sargent characterized it as econometric failure on a grand scale.(1) As is known to all, widespread joblessness in Greece and Spain pushed the unemployment rate in the eurozone to the worst level since 1999. Coupled with the pitched unemployment rate, the economy has suffered from fluctuation. Take the example of the news released in recent time, which is concerned with the financial situation in Eurozone. As what we can see in the news report, during the businessShow MoreRelatedInflation And Its Effect On The International Market853 Words   |  4 PagesInflation means continuing rise in the overall price level. General inflation or a decline in purchasing power of the currency devaluation, and devaluation of the currency is relative reduction between the two economies. General inflation used to describe of the national currency, which is used to describe the added value on the international market. Unemployment means any paid work status is not obtained. In economics category, a person willing and able to get the reward for the work, but theRead MoreThe Positive Relationship Between Inflation And Inflation1067 Words   |  5 Pagesthese examples can be observed when we compare inflation and unemployment rate. To establish this comparison in a short-run period of time, it will be beneficial to use the Phillip Curve. This curve can be used as a tool to represent the positive relationship between inflation and unemployment in the short-run. In order to comprehend the positive relationship between inflation and unemployment first, we must know what inflation is, how we define unemployment, and how we can use the Phillip Curve to makeRead MoreEconomic Growth Between Emerging And Developed Economics Essay1181 Words   |  5 PagesCanada, Australia, New Zealand and Japan. Emerging countries can be identifying with rapid growth rate and development but lower per capita than develope d countries, namely Brazil, Russia, India, and China, Ireland, Italy, Greece, Spain. The economic growth of countries can be measured by gross domestic product (GDP) per capita. This essay is going to find out â€Å"What are the main reasons behind different rate of economic growth in emerging and developed economics in last 15 years?† In hear I selectedRead MoreMacroeconomic Variables Of The Stock Market974 Words   |  4 Pagesstock agents find the critical importance but the government to implement macroeconomic policy; the solid finding of this relation will enable policy makers to efficiently and effectively control the economy as well as the capital market. We aim to cover some relationship between macroeconomic indicators, including consumption, interest rate unemployment rate and inflation rate, and with stock price. Stock price or return and consumption Consumption has been viewed as one of the most fundamentalRead MoreThe Relationship Between Inflation And Unemployment1662 Words   |  7 PagesThe relationship between inflation and unemployment is a topic, which has been debated by economists for decades. It is this debate that has made the opinions about it evolve. In this essay, the controversial topic will be discussed by viewing different economists’ opinions on that according to time sequencing. Inflation is an increase in price levels within an economy. Basically it means that you will have to pay more for the same goods. Unemployment is even more straightforward. It means thatRead MoreFiscal and Monetary Policy 946 Words   |  4 Pagesgovernment therefore to keep inflation low as well as keeping unemployment rate down. Philips curve gives the probability of having both a low unemployment and inflation hence providing the stakeholders in the sector in the short run a tradeoff between unemployment and inflation (Mark Asmaa, 2012). Unemployment can be kept under control by the government while at the same time allowing inflation OR to keep controlling prices and not controlling unemployment. This compromise between the two is shown as aRead MoreDeveloped Countries and Economically Developed Countries Essay examples927 Words   |  4 Pagesdone on the relationship between inflation rate and unemployment rate in developed country such as by Hogan (United State), Sackâ€℠¢l en (Sweden) and Andrei (Romania). They are done the same research with different method to get same objective. The most of the study is use a VECM method in their research. While, there is a few of the study was used a VAR method. 2.1.1 United States Related to the topic research which is relationship between inflation rate and unemployment rate, the developed countryRead MoreEconomic Policies Of Every Country Essay964 Words   |  4 Pages(increase in output (GDP) growth), price stability (inflation targeting), high employment etc. The policymakers have different tools to manage these issues, primarily by influencing the aggregate demand and supply, such as interest rates, requirements to the bank reserves, tax rates etc. Therefore, this is crucial to understand how these macroeconomic indicators are interconnected, such as for example output and unemployment, unemployment and inflation, and the mechanism of policy actions in each caseRead MoreThe Effect Of Inflation On The Economy822 Words   |  4 Pagesto represent the inverse relationship between inflation and unemployment in the short-run. In order to comprehend this inverse relationship, we must first know what inflation is, how we define unemployment, and how these two variables are connected using the Phillip Curve. If we understand the meaning of each one of these variables in the economy, it will be easier to comprehend the logic of a short-run tradeoff between unemployment and inflation. Inflation, in the economic, can be described asRead MoreMacroeconomic Policies And Regulate The Healthy Operation Of The National Economy1243 Words   |  5 Pagesgrowth and balance of international payments. In addition, inflation, unemployment and economic growth are the big macroeconomic issues of our time. In this essay we focus on inflation and unemployment. Unemployment occurs when a person who is actively searching for employment is unable to find work. Unemployment is often used as a measure of the health of the economy. The most frequently cited measure of unemployment is the unemployment rate. This is the number of unemployed persons divided by the