Answer to Question #256876 in Microeconomics for Ceilo Lily

Question

Imagine that your are a policymaker trying to decide whether to reduce the rate of inflation.To make an intelligent decision.What would you need to know about inflation unemployment and trade off between them?

Answer 1

Inflation and unemployment are mutually exclusive. This is since when consumer price index is attempted to be lowered, the unemployment rate rises, and when joblessness is attempted to be diminished, the inflation rate rises as well. Philips curve should be examined to acknowledge the compromise between rising prices and underemployment level.