Answer to Question #292607 in Macroeconomics for Ali

Question

what relationship exists between inflation and unemployment?

Answer 1

what relationship exists between inflation and unemployment?

Inflation and unemployment have had an inverse relationship historically, as depicted by the Phillips curve. High unemployment is associated with lower inflation or even deflation, whereas low unemployment is associated with lower inflation or even deflation. This relationship makes sense from a logical perspective. When unemployment is low, more people have more money to spend on things they want. Demand for commodities increases, and as demand increases, so do prices. Customers purchase fewer items during periods of high unemployment, putting downward pressure on pricing and lowering inflation.