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Inflation and Unemployment


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3.0 Inflation and Unemployment
Inflation and Unemployment are both intertwined. Inflation is a continuous increase in the rate at which the market prices for goods, as well as, services of the market rise and hence, the buying or purchasing power of goods and services falls. When inflation rises most businesses start putting in place tighter monetary policies that end up sacrificing job creation and wage growth that slows down economy growth. Unemployment refers to an economic situation in which people search for jobs or work but are unable to get the jobs thought they are able to work and accept the market wage rates given by firms. This means that when there are exists no vacancies, then there are no jobs. Unemployment can be used as an effective indicator of future inflation. When there is inflation in the economy value of money, falls meaning that the average goods' price would increase to a high level. For instance, if the economy goes to recession the unemployment levels rise.
Inflation and unemployment also known as stagflation was first reported in 1958 by A. W. Phillips he discovered that when unemployment falls, or there are vacancies available, workers were empowered to push for higher wages and, as a result company's passed these higher wage costs to consumers, which in turn results in higher prices of goods and services. These led to inflationary buildup in the economy. Both inflation and unemployment are related because an increase in the cumulative demand also increases inflation while lowering unemployment. Unemployment is defined by the characteristic of the labor market while inflation is determined by the growth of money
3.1. Causes of inflation
The main common causes of inflation include economic growth that grows too fast also known as demand pulls inflation and cost-push factors also

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