How are inflation and unemployment related?

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Do you know how employment and inflation are connected? Is there any cause-effect relationship between inflation and unemployment rates?

1 Answer

score 0 · Answer 1 · 2012-12-02T19:43:19+00:00

There are two different approaches. The short term approach and the long term approach. Based on the Phillips Curve, there is a negative relationship between unemployment and inflation in the short term or in other words, when inflation increases, unemployment decreases. The long term approach is that there should be no relationship between unemployment and inflation.