This relation posts an intuitive sense among the economists. The simple logic between this is that workers will be needed to push for higher wages as unemployment increases....
[tags: Inflation, Unemployment, Phillips curve] - Inflation is a tendency for nominal prices to increase.
There are two important elements of this definition which is the decrease of the level of prices (inflation rate - Causes of Inflation Inflation is defined as an increase in the expected price level and has been the signal for an improving economy, but it has also weakened an economy due to the unemployment it usually produces which usually hurts the Middle class the most.
A healthy rate of inflation means an expanding economy due to higher tax revenues for the government and higher wages for businesses that are booming due to the high demand of their products.
Inflation is measured commonly by changes over time in Gross Domestic Product (GDP) deflator or Customer Price Index (CPI).
GDP deflator is calculated by dividing the nominal GDP by the real GDP.[tags: Inflation, Money, Currency, Monetary policy] - Economics Student’s Name University Name Date Instructor’s Name There exists a clear relationship between unemployment and inflation.These two important terms of the economy are inversely related to each other. Philips first reported the tradeoff between unemployment and inflation, it has been called after him as Philips curve.CPI is calculated from the base year to another by finding the percent change in the price level from the base year to the comparison year.This is calculated by subtracting 100 from the CPI.The index of measurement of the inflation is the Index of Prices to the Consumer (IPC).This index measures the percentage increase in prices of a basic basket of products and services that a consumer acquires in the country. Deflation is a general decline in the prices of an economy, which is the opposite of inflation....Moreover, the causal relationship between these two series is studied using a more robust Granger causality test, without finding any directional causality between them.This paper uses the cointegration technique, and finds a significant and negative long‐run relationship between inflation and economic growth for the Mexican economy.Motivated by these questions, this present paper first examines cointegration techniques and then, threshold estimations. This paper surveys the existing literature on the relationship between inflation and economic growth in developed and developing countries, highlighting the theoretical and empirical indications.