Essay On Unemployment And Inflation

But, employment levels are at record highs and firms do mention difficulties of employing workers in certain areas.

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Types of Unemployment: Unemployment can occur for different reasons. Some of them will be moving voluntarily from one job to another. Fourth, because there will be frictional unemployment, we would not even desire an unemployment rate of zero.*Seasonal Unemployment Some people are unemployed because of the season of the year.

It can be categorized into four types:frictional, seasonal, structural and cyclical unemployment.*Frictional Unemployment: Frictional unemployment broadly consists of two types of unemployment: Search unemployment i.e. They have jobs in which one does not work part of the year.

But, generally when we talk about high inflation in the UK / Europe, we mean an inflation rate of 5-20%.

Off the top of my head, I believe the highest rate of inflation in UK since 1945 is around 27% in the 1970s. Inflation or 0 or 1% would be most likely to cause economic stagnation.

The medium run Phillips curve gives output at its natural rate and this is shown as the LRPC.

The LRPC displays that there is an assumption that demand management can affect inflation, however demand management policy's cannot permanently reduce the rate of unemployment below the natural rate of unemployment.

But, sometimes Central Banks (especially ECB) have made the mistake of focusing on reducing inflation at the expense of lower growth and higher unemployment.

Unemployment is very closely related to the business cycle.

By studying and understanding what inflation and unemployment are and how they relate, economists are able to predict many of the The Phillips Curve Economists agree that unemployment and inflation are two of the major macroeconomic problems of the twentieth century.

If a relationship between the two existed then this would be a major break through for the macro management of the economy.