Answer to Question #286563 in Macroeconomics for Bedilu

Question

Explain the relationship between inflation and unemployment, both in the short run and long run.

Answer 1

The relationship between inflation and unemployment can be explained by use of the Phillips curve. In the short-run, the two are inversely related, meaning as one quantity increases, the other decreases while in the long-run, there is no trade-off. This can be explained diagrammatically as below;