Answer to Question #220222 in Macroeconomics for Jeff

Question

How is each of the following likely to be affected by an inflation: the natural unemployment rate, the cyclical unemployment rate, the political system, and the poll ratings of the president? Explain.

Answer 1

The relationship between the inflation rates and the rates of natural unemployment are inversely related. With the decreasing rates of natural unemployment the rate of inflation increases.

Cyclical Unemployment is the type of unemployment that occurs due to the changes in the phases in the business cycle

During recession, the cyclic unemployment increases due to less economic activities and decreases during the expansion phase , inflation rates decrease during recession and increase during expansion. Therefore,the rate of cyclic unemployment and the rate of inflation rates are inversely related too.

High inflation rates lead to political instability. The nations that are associated with democracy and high degree of freedom experience less inflation compared to the aristocratic and dictatorial states.

During an electoral period, the candidate that addresses the issue of inflation and proposes a strategy to reduce the rates of inflation, gains more popularity among the voters.This is due to the fact that inflation is a national issue and every visionary leader should have a strategy or a way of reducing it.