How inflation and unemployement are related.

Essay by bigen3University, Master'sA+, November 2002

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Unemployment and Inflation

Unemployment and inflation are two completely different economic issues that are, surprisingly, very much related to one another. When dealing with both of these economic factors, it is important to understand that these topics are an extremely important part of today's economic world. By studying and understanding what inflation and unemployment are and how they relate, economists are able to predict many of the situations and complications that randomly take place in today's economy. Because of this financial knowledge, economists and the rest of society can better prepare for economic issues. After the definitions of what inflation and unemployment are made clear, one can understand how these two topics are directly related and understand some of the ways and tools that are used to predict and understand our economy.

To better understand their relation, it is important to first understand what inflation and unemployment actual are. The technical definition of inflation is a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

What this is basically saying is that inflation is a rise in the general level of prices in an economy. Whenever there is inflation, the prices of most goods and services are a little higher than usual. After understanding what inflation is, one can move on to unemployment. The definition of unemployment is simply the percentage or number of people who are involuntarily unemployed in a society. Unemployment is a little easier to understand than inflation simply because it is more of a straightforward topic. After comprehending what these two economic issues actually are, one can begin to understand how inflation and unemployment are related.

Unemployment and inflation are,